CCP Seminar: Estimation of search frictions in the British electricity market
April 18, 2013 Leave a comment
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.
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.