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
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Talat S. Genc & Stanley S. Reynolds, 2010.
"Supply Function Equilibria with Capacity Constraints and Pivotal Suppliers,"
1007, University of Guelph, Department of Economics and Finance.
- Genc, Talat S. & Reynolds, Stanley S., 2011. "Supply function equilibria with capacity constraints and pivotal suppliers," International Journal of Industrial Organization, Elsevier, vol. 29(4), pages 432-442, July.
- 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.
- Holmberg, P. & Newbery, D & Ralph, D., 2008.
"Supply Function Equilibria: Step Functions and Continuous Representations,"
Cambridge Working Papers in Economics
0863, Faculty of Economics, University of Cambridge.
- Holmberg, Pär & Newbery, David & Ralph, Daniel, 2013. "Supply function equilibria: Step functions and continuous representations," Journal of Economic Theory, Elsevier, vol. 148(4), pages 1509-1551.
- Holmberg, Pär & Newbery, David & Ralph, Daniel, 2009. "Supply Function Equilibria: Step Functions and Continuous Representations," Working Paper Series 788, Research Institute of Industrial Economics.
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