CCP Seminar: Estimation of search frictions in the British electricity market

The Centre is delighted to welcome Monica Giulietti (Warwick Business School) as this week’s guest speaker at the CCP seminar series. Monica will be presenting her paper entitled ‘Estimation of search frictions in the British electricity market‘, which she has conducted alongside Michael Waterson (Warwick) and Matthijs Wildenbeest (Indiana). A short abstract of the paper can be found below.

Abstract

This paper studies consumer search and pricing behaviour  in the British  domestic electricity market  following its opening to competition in 1999.  We develop a sequential search model in which an incumbent and  an entrant group compete  for consumers  who find it costly to obtain information on prices other  than  from their  current supplier.  We use a large data set on prices and input  costs to structurally estimate  the model.  Our estimates indicate that consumer search costs must  be relatively  high in order to rationalize  observed  pricing patterns. We confront our estimates with observed  switching  behaviour  and find they  match  well.

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