Pass-Through as a Test for Market Power: An Application to Solar Subsidies

Arthur van Benthem and Jacquelyn Pless ()

No 11908, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We formalize pass-through over-shifting as a simple yet under-utilized test for market power. We apply this test in the market for solar energy. Specifically, we estimate the pass-through of solar subsidies to solar system prices using rich micro-level transaction and subsidy data from California. Buyers of solar systems capture nearly the full subsidy, while there is more-than-complete pass-through to lessees. We conclude that solar markets are imperfectly competitive by ruling out alternative explanations for over-shifting, and reinforce this conclusion with a test of solar demand curvature. This procedure can serve to detect market power beyond the solar market.

Keywords: Solar subsidy; Pass-through; Over-shifting; Demand curvature; market power; Third-party ownership; Buy vs. lease (search for similar items in EconPapers)
JEL-codes: H22 Q42 Q48 Q58 (search for similar items in EconPapers)
Date: 2017-03
New Economics Papers: this item is included in nep-ene
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Pass-Through as a Test for Market Power: An Application to Solar Subsidies (2019)
Working Paper: Pass-Through as a Test for Market Power: An Application to Solar Subsidies (2018)
Working Paper: Pass-Through as a Test for Market Power: An Application to Solar Subsidies (2017)
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