A model of competition in the solar panel industry

- We develop a model competition in the solar module industry.
- Solar modules modeled as goods differentiated both vertically and horizontally.
- Data on costs, revenues, shipments used to estimate model parameters.
- Model simulated to examine impact of polysilicon price reduction on module prices.

We develop a model of competition in the solar panel industry. Solar firms manufacture panels that are differentiated both vertically and horizontally, and compete by setting quantities. The equilibrium of the model is consistent with a set of stylized facts that we document, including variation in prices, markups and market shares across firms. We calibrate the model using a new dataset data on prices, costs and shipments of leading solar companies, as well as solar sales in four leading markets. The calibrated model is applied to evaluate the impact of a decline in the price of polysilicon, a key raw material used in the manufacture of solar panels, on the equilibrium price of solar panels.