Estimation in English Auctions with Unobserved Heterogeneity (with Daniel Quint and Christopher Turansick) [PDF]
Abstract: We propose a framework for identification and estimation of a private values model with unobserved heterogeneity from bid data in English auctions, using variation in the number of bidders across auctions. We extend the framework to settings where the number of bidders is not cleanly observed in each auction, and illustrate our method on data from eBay auctions.
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.
On the Road to Recovery? The Effect of Power Plant Closures on the Local Housing Market (with Rachel Frattarola and Zack Barnett-Howell)
Abstract: Long-term exposure to pollution and local disamenities from power plants causes neighborhood decline, but power plant retirements may offer an opportunity for neighborhood recovery. We combine data on power plants with transactional housing price data for the Midwest to estimate the effect of power plant closures on local housing prices using difference-in-differences estimation. We find that the retirement of a fossil fuel power plant leads to an increase in local housing prices of 6 percent. The effect is heterogeneous across fuel type, as we find an increase of 4 to 6 percent for natural gas, an increase of 0 to 11 percent for petroleum, and a decrease of 7 to 8 percent for coal. This last result is driven by the fact that coal-fired power plants tend to remain present after retirement, as coal plant remediation takes multiple years, and not all plants are remediated.
How Effective are Renewable Portfolio Standards at Reducing CO2 Emissions? (with Alexander Galetovic and Cristián Muñoz)
Abstract: Many countries use renewable portfolio standards, compulsory regulations aimed at increasing electricity production from renewable energy, to reduce carbon dioxide emissions. Accounting for changes in investment, we find that the long-run effect of a renewable portfolio standard is the substitution of renewable energy for conventional base load generation. Using a calibrated dynamic model of the largest electricity market in Chile, we estimate the effect of the current production target, 20 percent renewable energy generation, on carbon dioxide emissions. Although renewable portfolio standards are effective at decreasing carbon dioxide emissions in places where coal plants supply the base load, we find that the policy is largely ineffective in Chile because it displaces hydropower production, as Chile has a large undeveloped potential for hydropower that can provide base load generation. Furthermore, the policy reduces carbon dioxide emissions by far less than a Pigovian tax and at a higher cost per ton since the Pigovian tax incentivizes investments in renewable energy as well as the substitution of natural gas for coal.
Simple Inference in First Price Auctions (with Brandon Reeves)
Identification and Estimation in Asymmetric English Auctions with Unobserved Heterogeneity (with Amit Gandhi and Daniel Quint)
Coase and Market Power Dynamics: The Effect of the Initial Allocation of Water Rights on Investment in Chile's Electricity Industry
The Effect of Firm-Sponsored Training on Firm Productivity (with Siha Lee and Fu Tan)
Galetovic A., Hernández, C., Muñoz, C. and L.M. Neira, (2014), “Microeconomic Reforms, Productivity and Policies: An Exploration into Chile’s Electricity Sector,” Growth Opportunities for Chile, Santiago: CEP.