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Junnan He is an Assistant Professor in Economics at Sciences Po.
TOPIC: Diversified Production and Market Power: Theory and Evidence from Renewables
ABSTRACT: We demonstrate that when firms compete via supply functions, transferring high-cost capacity to the largest, most efficient firm—thereby diversifying its production technologies while increasing concentration—can lower prices by prompting the leader to expand output and competitors to aggressively defend market shares. However, large transfers prove anticompetitive, as sizable capacity differences reduce incentives to undercut. Exploiting renewable intermittencies in Colombia’s electricity market, where firms are technology-diversified, we consistently find that prices are U-shaped in concentration. Counterfactually reallocating 30\% of competitors' high-cost capacity to the leader cuts prices 10\%, while larger transfers raise them, revealing how capacity and efficiency influence market power.
Zoom Link for Seminar Series https://arizona.zoom.us/j/84592612397