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The Market Response to Restructuring: A Behavioral Model

  • Faye Steiner

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    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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    File URL: http://hdl.handle.net/10.1023/B:REGE.0000008655.66589.0e
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    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
    Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100298

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    1. 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.
    2. Green, Richard & Newbery, David M G, 1991. "Competition in the British Electricity Spot Market," CEPR Discussion Papers 557, C.E.P.R. Discussion Papers.
    3. 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.
    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 269-95, October.
    5. Joskow, Paul L. & Noll, Roger G., . "Regulation in Theory and Practice: An Overview," Working Papers 213, California Institute of Technology, Division of the Humanities and Social Sciences.
    6. 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.
    7. Gilbert,Richard J. & Kahn,Edward P. (ed.), 1996. "International Comparisons of Electricity Regulation," Cambridge Books, Cambridge University Press, number 9780521495905.
    8. Spiller, Pablo T, 1996. "Institutions and Commitment," Industrial and Corporate Change, Oxford University Press, vol. 5(2), pages 421-52.
    9. 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.
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