Redistribution Through Technology: Equilibrium Impacts of Mandated Efficiency in Three Electricity Markets
Matti Liski and Iivo Vehviläinen
We consolidate, generalize, and expand on a set of price-theory results to measure consumer benefits from technologies that improve the efficiency of allocations in markets. We then conduct the same efficiency-improving counterfactual experiment in three major electricity markets. The convexity of excess demand, obtained from the bids to buy and sell, is a novel measure that strongly predicts consumer benefits in all markets. It highlights that small allocative improvements from technology mandates lead to large redistributions of surplus benefitting consumers.
Keywords: Information technology, frictions, trade, electricity
JEL Classification: D61, D83, F10, Q41, Q48