Relating product prices to long-run marginal cost : evidence from solar photovoltaic modules

Reichelstein, Stefan ; Sahoo, Anshuman

Document Type: Working paper
Year of publication: 2017
The title of a journal, publication series: Working Papers
Volume: 3069
Place of publication: Stanford, CA
Publishing house: Stanford Graduate School of Business
ISSN: 1869-0483 , 1869-0491
Publication language: English
Institution: Business School > Stiftungsprofessur für ABWL (Reichelstein 2018-)
Subject: 330 Economics
Abstract: A basic tenet of microeconomics is that for a competitive industry in equilibrium the market price of a product will be equal to its marginal cost. This paper develops a model framework and a corresponding empirical inference procedure for estimating longrun marginal cost in industries where production costs decline over time. In the context of the solar photovoltaic (PV) module industry, we rely primarily on firm-level financial accounting data to estimate the long-run marginal cost of PV modules for the years 2008–2013. During those years, the industry experienced both unprecedented price declines and significant expansions of manufacturing capacity. We compare the trajectory of average sales prices with the estimated long-run marginal costs in order to quantify the extent to which actual price declines were attributable to reductions in production costs. The trajectory of estimated product costs is then extrapolated to forecast an equilibrium trend line for future PV module prices.

Dieser Datensatz wurde nicht während einer Tätigkeit an der Universität Mannheim veröffentlicht, dies ist eine Externe Publikation.

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