Essays in econometrics and energy markets

This thesis is organized in three chapters which develop economic and econometric methods for the analysis of energy markets.   In Chapter 1, we study the incentives for market manipulations created by opportunities to renege on prior commitments. We develop a theoretical framework to analyze the behavior of a monopolist facing a competitive fringe in the presence of demand uncertainty, capacity constraints and reneging opportunities. The firms are assumed to compete in supply functions taking their commitments as sunk decisions. Reneging occurs when the monopolist withdraws its committed output upon observing the realization of demand. By doing so, it can exacerbate its market power, alleviate demand uncertainty, and be more likely to be pivotal. At equilibrium, supply strategies depend on the volume of committed output and the opportunity cost of reneging. In particular, the monopolist may find profitable to offer some of its market output at higher prices in the presence of reneging opportunities. Finally, we present strategic reneging as a loss-based manipulative conduct in a general framework and discuss applications to electricity markets.  In Chapter 2, we develop new estimation results for functional regressions where both the regressor Z(t) and the response Y (t) are functions of Hilbert spaces, indexed by the time or a spatial location. The model can be thought as a generalization of the multivariate regression where the regression coefficient is now an unknown operator Π. We propose to estimate the operator Π by Tikhonov regularization, which amounts to apply a penalty on the L2 norm of Π. We derive the rate of convergence of the mean-square error, the asymptotic distribution of the estimator, and develop tests on Π. As trajectories are often not fully observed, we consider the scenario where the data become more and more frequent (infill asymptotics). We also address the case where Z is endogenous and instrumental variables are used to estimate Π. An application to the electricity consumption completes the paper.   Chapter 3 proposes a novel approach for the empirical analysis of multiunit auctions, to which participants submit supply or demand functions observable by the researcher. The approach allows for the evaluation of firmlevel market power in a private information setting, and avoids having to model the market mechanism. It relies on econometric methods that treat the observed bid functions as function-valued random elements. Notably, a functional instrumental variable estimator is developed. The method is applied to the New York electricity market using rich data on firm-level bids and marginal costs for 2013-2015. In this market, daily bids are disclosed three months later in order to limit strategic behaviors. I estimate firm-level market power and compare actual bidding behavior to profit-maximizing behavior under private information. I find consistent evidence of optimal bidding, suggesting that firms are well aware of their own market power and behave accordingly. Therefore, the late disclosure of bids is not sufficient to preclude firms from acting strategically, most likely due to the repeated nature of those auctions.

Keyphrases: functional regression, market power, electricity markets, reneging, commitment, market manipulation, empirical auctions, instrumental variables, linear operator, Tikhonov regularization