Journal
JOURNAL OF INDUSTRIAL ECONOMICS
Volume 55, Issue 4, Pages 661-689Publisher
WILEY
DOI: 10.1111/j.1467-6451.2007.00325.x
Keywords
-
Categories
Ask authors/readers for more resources
Electricity restructuring has created the opportunity for producers to exercise market power. Oligopolists increase price by distorting output decisions, causing cross-firm production inefficiencies. This study estimates the environmental implications of production inefficiencies attributed to market power in the Pennsylvania, New Jersey, and Maryland electricity market. Air pollution fell substantially during 1999, the year in which both electricity restructuring and new environmental regulation took effect. I find that strategic firms reduced their emissions by approximately 20% relative to other firms and their own historic emissions. Next, I compare observed behavior with estimates of production, and therefore emissions, in a competitive market. According to a model of competitive behavior, changing costs explain approximately two-thirds of the observed pollution reductions. The remaining third can be attributed to firms exercising market power.
Authors
I am an author on this paper
Click your name to claim this paper and add it to your profile.
Reviews
Recommended
No Data Available