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Subsidies and Investments in the Solar Power Market |
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Over the last ten years, the solar photovoltaic (PV) market has grown rapidly due in part to government incentive programs. I estimate a dynamic consumer demand model to evaluate the effects of actual and counterfactual policies on residential solar installations. My results indicate that with a $72 social cost of carbon, the subsidy in California would be welfare neutral. This cost increases to $124 if I account for the tax credits. When comparing the two most frequently-used incentive schemes, I find that the upfront subsidy encourages more adoptions than the production-based subsidy, but the latter is more ecient. Overall, I finnd that the welfare costs of encouraging prolific solar adoptions in a suboptimal location are high.
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Corruption and Socially Optimal Entry(with Rabah Amir) |
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This paper investigates the effet of unhindered corruption in the entry-certifying process of an industru on market structure and social welfare. To gain entry, a firm must pay a bribe-maximizing official an exogenous percentage of anticipated profit, in addition to the usual st up cost. This wold lead to a monopolu, but only in markets without pre-existing firms. A benevolent social planner may use bribery to the benefit of society by either manipulating the number of pre-existing firms in the market, or by setting up independent (corrupt) licensing authorities. A socially optimal number of firms in the market may be reached by choosing the right number of pre-existing firms or by having exactly two licensing authorities. These mechanisms may be seen as restoring second-best efficiency in settings characterized by two major sources of distortion: Imperfect competition and corruption.
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On the Prisoner's Dilemma in R&D with Input Spillovers(with Malgorzata Knauff and Anna Stepanova) |
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This paper extends the result that duopoly firms engaged in a standard two-stage game of R&D and Cournot competition are caught in a prisoner's dilemma for their R&D decisions whenever spillover effects and R&D costs are low. In terms of social welfare, this effect always works to the advantage of consumers and society. This result provides an interesting perspective on the incentives firms have towards R&D cooperation, which is shown here to be U-shaped in the size of spillovers. The prisoner's dilemma also provides an insightful explanation for the well-known wedge between private and social incentives for R&D under low spillovers. The latter take over when suciently high, as is widely recognized. |
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