Cristián Hernández

I am a fifth year PhD student in the Department of Economics at the University of Wisconsin-Madison.

I am currently on the job market, and I will be attending the 2018 ASSA/AEA Annual Meetings in Philadelphia.

Research interests: Industrial Organization, Energy Economics, Applied Microeconomics.

Email: cahernandez3@wisc.edu

CV [PDF]

Statement of Research [PDF]

Job Market Paper

Resource Misallocation in an Oligopoly Environment: Evidence from Texas' Electricity Industry [PDF]

Abstract: Production misallocation arises when markets fail to allocate production across plants at minimum cost. Electricity markets have a large potential for misallocation since they have imperfect competition and heterogeneous costs. This paper measures the extent of production misallocation and price distortions in Texas’ electricity market for 2009 and tests whether strategic behavior generates these inefficiencies. Using a novel data set that combines plant level marginal costs, firm bid functions, and equilibrium prices, I construct a set of efficient outcomes and compare them to observed output, total cost, and prices. I find production misallocation of approximately 9.5 percent, or $160 million. One-fifth of this cost distortion is attributable to intra-firm inefficiencies, while the rest is from inter-firm inefficiencies. These results account for power plant ramping constraints, typically unavailable to the researcher, but ignoring these short-term production constraints almost quadruples the measured distortion. I also measure systematic departures from competitive pricing in the spot market that increase revenues by $192 million and show that market distortions are mostly generated by strategic firm behavior.