Deregulation, Market Power, and Prices: Evidence from the Electricity Sector

Ignacia Mercadal
Columbia University
Monday, April 19, 2021 – 04:00 – 05:15 PM (CEST)
Live virtual event: please register for this talk via Zoom

Seminar Abstract
When deciding whether to introduce market-based prices into a regulated market, a regulator faces the following tradeoff: profit incentives may reduce costs through the more efficient allocation of resources, but the presence of market power may lead to increased markups. We use a detailed dataset on electricity transactions to investigate the impact of market-based deregulation in the context of the U.S. electricity sector. We find that the increase in markups dominates despite modest efficiency gains, leading to higher prices to consumers. Deregulation does not necessarily lead to lower prices to consumers. A consumer-oriented regulator may prefer to regulate rates to be consumer friendly, rather than let prices be subject to market power.

Speaker Bio
Ignacia Mercadal is an assistant professor in the School of International and Public Affairs at Columbia University. Her research focuses on industrial organization and energy economics. She previously served as a postdoctoral fellow at the MIT Center for Energy and Environmental Policy Research and the MIT Sloan School of Management. Mercadal holds a PhD in Economics from the University of Chicago, a MSc from Tilburg University, and an MA and a BA from Pontificia Universidad Católica de Chile.

Admission information
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