Relating Product Prices to Long‐Run Marginal Cost: Evidence from Solar Photovoltaic Modules
Abstract
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 long‐run 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.
- Authors:
-
- Stanford University, University of Mannheim
- Stanford University
- Publication Date:
- Sponsoring Org.:
- USDOE
- OSTI Identifier:
- 1493396
- Resource Type:
- Publisher's Accepted Manuscript
- Journal Name:
- Contemporary Accounting Research
- Additional Journal Information:
- Journal Name: Contemporary Accounting Research Journal Volume: 35 Journal Issue: 3; Journal ID: ISSN 0823-9150
- Publisher:
- Wiley-Blackwell
- Country of Publication:
- Country unknown/Code not available
- Language:
- English
Citation Formats
Reichelstein, Stefan, and Sahoo, Anshuman. Relating Product Prices to Long‐Run Marginal Cost: Evidence from Solar Photovoltaic Modules. Country unknown/Code not available: N. p., 2017.
Web. doi:10.1111/1911-3846.12319.
Reichelstein, Stefan, & Sahoo, Anshuman. Relating Product Prices to Long‐Run Marginal Cost: Evidence from Solar Photovoltaic Modules. Country unknown/Code not available. https://doi.org/10.1111/1911-3846.12319
Reichelstein, Stefan, and Sahoo, Anshuman. Fri .
"Relating Product Prices to Long‐Run Marginal Cost: Evidence from Solar Photovoltaic Modules". Country unknown/Code not available. https://doi.org/10.1111/1911-3846.12319.
@article{osti_1493396,
title = {Relating Product Prices to Long‐Run Marginal Cost: Evidence from Solar Photovoltaic Modules},
author = {Reichelstein, Stefan and Sahoo, Anshuman},
abstractNote = {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 long‐run 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.},
doi = {10.1111/1911-3846.12319},
journal = {Contemporary Accounting Research},
number = 3,
volume = 35,
place = {Country unknown/Code not available},
year = {Fri Oct 20 00:00:00 EDT 2017},
month = {Fri Oct 20 00:00:00 EDT 2017}
}
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https://doi.org/10.1111/1911-3846.12319
https://doi.org/10.1111/1911-3846.12319
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