Energy Efficiency: Efficiency or Monopsony?
AbstractThe cliché in the electricity sector, the "cheapest power plant is the one we don’t build," seems to neglect the benefits of the energy that plant would generate. Those overall benefits could be countered by benefits to consumers if "not building that plant" was the result of monopsony. A regulator acting as a monopsonist may need to avoid rationing demand at monopsony prices. Subsidizing energy efficiency to reduce electricity demand at the margin can solve that problem, if energy efficiency and electricity use are substitutes. We may not observe these effects if the regulator can set price as well as quantity, lacks buyer-side market power, or is legally precluded from denying generators a reasonable return on capital. Nevertheless, the possibility of monopsony remains significant in light of the debate as to whether antitrust enforcement should maximize consumer welfare or total welfare.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by UMBC Department of Economics in its series UMBC Economics Department Working Papers with number 09-110.
Length: 26 pages
Date of creation: 01 May 2009
Date of revision: 01 May 2009
Contact details of provider:
Postal: UMBC Department of Economics 1000 Hilltop Circle Baltimore MD 21250, USA
Web page: http://www.umbc.edu/economics
More information through EDIRC
Find related papers by JEL classification:
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dennis W. Carlton, 2007.
"Does Antitrust Need to be Modernized?,"
EAG Discussions Papers
200703, Department of Justice, Antitrust Division.
- Kenneth Heyer, 2006. "Welfare Standards and Merger Analysis: Why not the Best?," EAG Discussions Papers 200608, Department of Justice, Antitrust Division.
- Russ Pittman, 2007.
"Consumer Surplus as the Appropriate Standard for Antitrust Enforcement,"
Competition Policy International, vol. 3.
- Russell Pittman, 2007. "Consumer Surplus as the Appropriate Standard for Antitrust Enforcement," EAG Discussions Papers 200709, Department of Justice, Antitrust Division.
- George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
- 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.
- Timothy Brennan, 2010. "Decoupling in electric utilities," Journal of Regulatory Economics, Springer, vol. 38(1), pages 49-69, August.
- Brennan, Timothy J., 2010. "Optimal energy efficiency policies and regulatory demand-side management tests: How well do they match?," Energy Policy, Elsevier, vol. 38(8), pages 3874-3885, August.
- Timothy J. Brennan, 2009. "The Challenges of Climate for Energy Markets," UMBC Economics Department Working Papers 09-111, UMBC Department of Economics, revised 01 Sep 2009.
- Brennan, Timothy J., 2009. "The Challenges of Climate for Energy Markets," Discussion Papers dp-09-32, Resources For the Future.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christelle Viauroux).
If references are entirely missing, you can add them using this form.