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The Market Response to Restructuring: A Behavioral Model

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  • Faye Steiner

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    Abstract

    In this paper, I model the behavior of producers, consumers, and regulators in deciding to restructure the electricity sector and estimate their equilibrium response to the newly restructured market. The empirical model consists of simultaneous price and restructuring equations with endogenous switching and cross-equation correlation in the errors. This approach allow me to account for the influence of special interest groups and potential selection bias in which countries choose to restructure. I estimate distinct shifts from restructuring in both industrial and residential prices, and for English speaking, Scandinavian, and South American countries. I find that in all countries, it is industrial consumers that experience the price effects of restructuring, while residential consumers remain largely unaffected. In English speaking and Scandinavian countries, industrial prices decrease while in South American countries they increase. This is consistent with the political–economic environment in which these countries have considered restructuring. Copyright Kluwer Academic Publishers 2004

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    Bibliographic Info

    Article provided by Springer in its journal Journal of Regulatory Economics.

    Volume (Year): 25 (2004)
    Issue (Month): 1 (January)
    Pages: 59-80

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    Handle: RePEc:kap:regeco:v:25:y:2004:i:1:p:59-80

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    Web page: http://www.springerlink.com/link.asp?id=100298

    Related research

    Keywords: deregulation; electricity; political interest groups; comparative international study;

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    1. Jarrell, Gregg A, 1978. "The Demand for State Regulation of the Electric Utility Industry," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 269-95, October.
    2. P. L. Joskow & R. G. Noll, 1978. "Regulation in Theory and Practice: An Overview," Working papers 218, Massachusetts Institute of Technology (MIT), Department of Economics.
    3. Gilbert,Richard J. & Kahn,Edward P. (ed.), 1996. "International Comparisons of Electricity Regulation," Cambridge Books, Cambridge University Press, number 9780521495905, April.
    4. Palmer, Karen & Ando, Amy, 1998. "Getting on the Map: The Political Economy of State-Level Electricity Restructuring," Discussion Papers dp-98-19-rev, Resources For the Future.
    5. Green, Richard J & Newbery, David M, 1992. "Competition in the British Electricity Spot Market," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 929-53, October.
    6. Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 371-400, August.
    7. Noll, Roger G., 1999. "Telecommunications Reform in Developing Countries," Working paper 527, Regulation2point0.
    8. Robert H. Patrick & Frank A. Wolak, 2001. "Estimating the Customer-Level Demand for Electricity Under Real-Time Market Prices," NBER Working Papers 8213, National Bureau of Economic Research, Inc.
    9. Frank A. Wolak & Robert H. Patrick, 2001. "The Impact of Market Rules and Market Structure on the Price Determination Process in the England and Wales Electricity Market," NBER Working Papers 8248, National Bureau of Economic Research, Inc.
    10. Spiller, Pablo T, 1996. "Institutions and Commitment," Industrial and Corporate Change, Oxford University Press, vol. 5(2), pages 421-52.
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    Cited by:
    1. Guerriero, Carmine, 2013. "The political economy of incentive regulation: Theory and evidence from US states," Journal of Comparative Economics, Elsevier, vol. 41(1), pages 91-107.
    2. Chien-Ping Chen, 2005. "Residential Consumer Switching and Electricity Restructuring Policy: The Pennsylvania Power Market," Atlantic Economic Journal, International Atlantic Economic Society, vol. 33(3), pages 311-323, September.
    3. Roxas, Fernando & Santiago, Andrea, 2010. "Broken dreams: Unmet expectations of investors in the Philippine electricity restructuring and privatization," Energy Policy, Elsevier, vol. 38(11), pages 7269-7277, November.

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