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

Jacquelyn Pless () and Arthur A. van Benthem

No 212, OxCarre Working Papers from Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford

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. Speci cally, we estimate the pass-through ofsolar subsidies to solar system prices using rich micro-level transaction and subsidy data fromCalifornia. 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 competitiveby ruling out alternative explanations for over-shifting, and reinforce this conclusion with a testof solar demand curvature. This procedure can serve to detect market power beyond the solarmarket.

Keywords: solar subsidy; pass-through; over-shifting; demand curvature; market power; third- (search for similar items in EconPapers)
JEL-codes: H22 Q42 Q48 Q58 (search for similar items in EconPapers)
Date: 2018-07-09
New Economics Papers: this item is included in nep-com, nep-ene and nep-reg
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Related works:
Journal Article: Pass-Through as a Test for Market Power: An Application to Solar Subsidies (2019) Downloads
Working Paper: Pass-Through as a Test for Market Power: An Application to Solar Subsidies (2017) Downloads
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