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WHO (ELSE) BENEFITS FROM ELECTRICITY DEREGULATION? COAL PRICES, NATURAL GAS, AND PRICE DISCRIMINATION
Author(s) -
Hughes Jonathan E.,
Lange Ian
Publication year - 2020
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12896
Subject(s) - deregulation , economic rent , economics , electricity , upstream (networking) , coal , market power , electricity market , natural resource economics , industrial organization , microeconomics , market economy , engineering , waste management , telecommunications , electrical engineering , monopoly
Deregulation of major industries over the past 40 years has produced large efficiency gains. However, distributional effects have been more difficult to assess. In the electricity sector, deregulation has vastly increased information available to market participants through the formation of wholesale markets. We test whether upstream suppliers, specifically railroads that transport coal from mines to power plants, use this information to capture economic rents that would otherwise accrue to electricity generators. We find railroads charge higher markups when rents are larger. This effect is larger for deregulated plants, highlighting an important distributional impact of deregulation. ( JEL L11, L51, Q48)