Three Essays in Energy Economics and Industrial Organization, with Applications to Electricity and Distribution Networks

Electricity industries are experiencing upward cost pressures in many parts of the world. Chapter 1 of this thesis studies the production technology of electricity distributors. Although production and cost functions are mathematical duals, practitioners typically estimate only one or the other. This chapter proposes an approach for joint estimation of production and costs. Combining such quantity and price data has the effect of adding statistical information without introducing additional parameters into the model. We define a GMM estimator that produces internally consistent parameter estimates for both the production function and the cost function. We consider a multi-output framework, and show how to account for the presence of certain types of simultaneity and measurement error. The methodology is applied to data on 73 Ontario distributors for the period 2002-2012. As expected, the joint model results in a substantial improvement in the precision of parameter estimates.;In chapter 3, I turn to the historically important problem of vertical contractual relations. While the existing literature has established that resale price maintenance is sufficient to coordinate the distribution network of a manufacturer, this chapter asks whether such vertical restraints are necessary. Specifically, I study the vertical contracting problem between an upstream manufacturer and its downstream distributors in a setting where spot market contracts fail, but resale price maintenance cannot be appealed to due to legal prohibition. I show that a bonus scheme based on retail revenues is sufficient to provide incentives to decentralized retailers to elicit the correct levels of both price and service.;Chapter 2 focuses on productivity trends in electricity distribution. We apply two methodologies for estimating productivity growth . an index based approach, and an econometric cost based approach . to our data on the 73 Ontario distributors for the period 2002 to 2012. The resulting productivity growth estimates are approximately &...