Ariel Pakes (Harvard) will present:

"Just Starting Out: Learning and Equilibrium in a New Market"

at 12pm on Thursday, October 15, 2015 in 310 Silsby

Lunch will be provided


Please sign up for a meeting, or dinner at:

https://docs.google.com/spreadsheets/d/1iaSb6PcckpIBrfaNV8MkQ0frcee7datYggaa6imYABs/edit?usp=sharing


If you will be attending the Lunch Seminar please RSVP to me so I can order the appropriate amount of food.


Abstract


We document the evolution of the newly created market for frequency response within the UK electricity system. A rm entering this market faces considerable uncertainties related to market demand and rivals' behavior. We show that the market converges over time to a rest point that is consistent with a notion of equilibrium. We draw on learning models from the existing literature to further analyze how this convergence occurs. We show that relatively simple models that combine learning about rivals' behavior with learning about demand t parts of the data well and indeed outperform equilibrium analysis.







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