Optimal Willingness to Supply Wholesale Electricity under Asymmetric Linearized Marginal Costs
AbstractThis analysis derives the profit-maximizing willingness to supply functions for singleplant and multi-plant wholesale electricity suppliers that all incur linear marginal costs. The optimal strategy must result in linear residual demand functions in the absence of capacity constraints. This necessarily leads to a linear pricing rule structure that can be used by firm managers to construct their offer curves and to serve as a benchmark to evaluate firm profit-maximizing behavior. The procedure derives the cost functions and the residual demand curves for merged or multi-plant generators, and uses these to construct the individual generator plant offer curves for a multi-plant firm.
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Bibliographic InfoArticle provided by Econjournals in its journal International Journal of Energy Economics and Policy.
Volume (Year): 2 (2012)
Issue (Month): 4 ()
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Web page: http://www.econjournals.com
Wholesale Electricity; Cost; Willingness to Supply; Linear Analysis; Multi-Plant; Asymmetric;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
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- Holmberg, Pär & Newbery, David & Ralph, Daniel, 2013.
"Supply function equilibria: Step functions and continuous representations,"
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- Genc, Talat S. & Reynolds, Stanley S., 2011.
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International Journal of Industrial Organization,
Elsevier, vol. 29(4), pages 432-442, July.
- Talat S. Genc & Stanley S. Reynolds, 2010. "Supply Function Equilibria with Capacity Constraints and Pivotal Suppliers," Working Papers 1007, University of Guelph, Department of Economics.
- Richard Green, 2007. "Nodal pricing of electricity: how much does it cost to get it wrong?," Journal of Regulatory Economics, Springer, vol. 31(2), pages 125-149, April.
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