Market power and heterogeneous pass-through in German electricity retail

European Economic Review, 2017, vol. 98, issue C, 354-372

Abstract: We analyze the pass-through of cost changes to retail tariffs in the German electricity market over the 2007–2014 period. We find an average pass-through rate of around 60%. This significantly varies with demand factors: while the pass-through rate to baseline tariffs, where firms have greater market power because customers are less willing to switch, is only 50%, it increases to 70% in the competitive segment of the market. Although the pass-through rate of independent firms is significantly higher than that of other firms in the competitive market segment, the extent of supply-side heterogeneity is limited. Thus, the firms’ ability to exercise market power and reduce pass-through appears to be constrained by competition and largely determined by demand side factors. Finally, we find that the pass-through rate in the competitive market segment has been approaching unity over the past years, indicating a rise in competitive pressure.

Keywords: Pass-through; Electricity retail; Market power; Germany (search for similar items in EconPapers)
JEL-codes: D4 Q4 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

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Working Paper: Market Power and Heterogeneous Pass-through in German Electricity Retail (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:98:y:2017:i:c:p:354-372

DOI: 10.1016/j.euroecorev.2017.07.010

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