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

Jacquelyn Pless () and Arthur A. van Benthem

American Economic Journal: Applied Economics, 2019, vol. 11, issue 4, 367-401

Abstract: We formalize pass-through over-shifting as a simple yet underutilized 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.

JEL-codes: H23 H76 L13 L63 Q42 Q48 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/app.20170611
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Citations: View citations in EconPapers (49)

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