This dissertation consists of three papers on applied topics in industrial organization. Two of the papers analyze important challenges of policy interest that electricity markets are currently facing. The third paper studies the consequences of demand restrictions in drug markets.

The first chapter of my dissertation refers to a paper related to coal regulation. Regulations that provide incentives to firms to continue producing energy from traditional sources such as coal or nuclear are of policy interest primarily due to two important benefits. First, production from such sources ensures a stable supply, as energy produced from renewable sources can be intermittent. Second, production from such sources also ensures a demand for their respective inputs that can play a crucial role in local labor markets. Despite these benefits, delaying the closure of coal-based generation through these regulations may come with high costs to consumers and the environment. In this paper, I study the consequences of a Spanish regulation that incentivized coal production by providing capacity payments to some unprofitable coal power plants using domestic input. First, I show that the regulation reduced production from gas plants, which is a cleaner and more flexible technology, and increased equilibrium prices due to higher bids as regulated plants used more expensive inputs, i.e. domestic coal. Next, I propose an empirical framework to investigate different counterfactual scenarios. I show that an alternative policy design would have reduced consumer costs by 3.2% in comparison to the regulation. My results also demonstrate that total consumer costs also decrease when regulated plants retire and when renewable experiences a substantial negative shock.

The second chapter is a paper that is joint work with Professor Mar Reguant and that evaluates external and internal costs of wind intermittency. The economics literature has focused on quantifying the marginal value of renewables by looking at their market value as a decrease on energy market price and environmental value as a reduction of emissions. However, variable renewable energy adds integration costs due to its intermittency that need to be accounted for to design the optimal generation mix. This paper analyzes the costs of wind intermittency in the context of the Iberian Electricity Market (IEM). Exploiting the market design of the IEM, we define two types of intermittency costs: external and internal. First, external costs are charged to final consumers as part of operational costs. Second, internal costs are accounted for by firms when making their decisions and they penalize last-minute imbalances. Using detailed data from the IEM, we empirically estimate the impact of wind generation and wind intermittency on external costs for different levels of wind integration. Moreover, we show that firms respond to penalties by reducing their deviations. Our paper demonstrates that both wind generation and wind intermittency have a positive average impact on external and internal costs. Therefore, failing to account for these integration costs overstates the marginal value of wind.

Finally, the third chapter is a paper that studies the equilibrium effects of demand restrictions in the market for Hepatitis C drugs. A number of life saving yet prohibitively expensive drugs that target a large pool of potential consumers have recently entered the market. To control the costs of these drugs, state Medicaid agencies individually restrict their access to patients who are at the final stages of the disease. This paper solves a two-stage model to illustrate the equilibrium consequences of these demand restrictions. In the second stage, I construct a theoretical bargaining model between state Medicaid agencies and drug manufacturers to demonstrate how demand restrictions affect negotiated prices. Whereas, in the first stage, I provide a welfare criterion to how the Medicaid chooses these endogenous restrictions. Using Medicaid drug utilization data for the Hepatitis C virus drug and variation in restrictions across states, I then provide empirical evidence for some of the model implications for both stages.