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The Market Response to Restructuring: A Behavioral Model


  • Faye Steiner



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

Suggested Citation

  • Faye Steiner, 2004. "The Market Response to Restructuring: A Behavioral Model," Journal of Regulatory Economics, Springer, vol. 25(1), pages 59-80, January.
  • Handle: RePEc:kap:regeco:v:25:y:2004:i:1:p:59-80
    DOI: 10.1023/B:REGE.0000008655.66589.0e

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    References listed on IDEAS

    1. 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.
    2. 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.
    3. Spiller, Pablo T, 1996. "Institutions and Commitment," Industrial and Corporate Change, Oxford University Press, vol. 5(2), pages 421-452.
    4. 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 269-295, October.
    5. Paul L. Joskow & Roger G. Noll, 1981. "Regulation in Theory and Practice: An Overview," NBER Chapters,in: Studies in Public Regulation, pages 1-78 National Bureau of Economic Research, Inc.
    6. 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.
    7. 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 929-953, October.
    8. Gary S. Becker, 1983. "A Theory of Competition Among Pressure Groups for Political Influence," The Quarterly Journal of Economics, Oxford University Press, vol. 98(3), pages 371-400.
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    Cited by:

    1. 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.
    2. Bassanini, Andrea & Brunello, Giorgio, 2011. "Barriers to entry, deregulation and workplace training: A theoretical model with evidence from Europe," European Economic Review, Elsevier, vol. 55(8), pages 1152-1176.
    3. 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.
    4. Chien-Ping Chen, 2005. "Residential Consumer Switching and Electricity Restructuring Policy: The Pennsylvania Power Market," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 33(3), pages 311-323, September.


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