Discussion Papers, Department of Business and Management Science, Norwegian School of Economics (NHH)
Sun and Lemons: Getting over Information Asymmetries in the California Solar Market
Abstract: Using detailed data of approximately 125,000 solar
photovoltaic systems installed in California between 2007 and 2014 I argue
that the adoption of solar panels from Chinese manufacturers and the
introduction of a leasing model for solar systems are closely intertwined.
First, cheaper Chinese panels allowed a leasing model to be profitable for
contractors. But an asymmetric information problem exists in the market for
solar panels. Solar panels are long-lived productive assets, where quality
is important but costly for individual consumers to verify. Consumers can
instead be expected to rely on brands and observed reliability. This led to
a barrier to entry for cheaper panels from new, primarily Chinese
manufacturers. The adoption of a leasing model by several large local
installers solved the asymmetric information problem and led to the
adoption of Chinese panels and in turn lower overall system prices.
Keywords: Solar panels; asymmetric information problem; (follow links to similar papers)
JEL-Codes: Q00; Q40; (follow links to similar papers)
38 pages, October 13, 2014
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