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Incentives and coordination in vertically related energy markets

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  • Micola, Augusto Rupérez
  • Banal-Estañol, Albert
  • Bunn, Derek W.

Abstract

We present an agent-based model of a multi-tier energy market. We show how reward interdependence between strategic business units within a vertically integrated firm can increase its profits in oligopolistic energy markets. The effects are shown to be distinct from those of the raising rivals' costs model. In our case, higher prices relate to the nature of energy markets, which facilitate the emergence of financial netback effects.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 67 (2008)
Issue (Month): 2 (August)
Pages: 381-393

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Handle: RePEc:eee:jeborg:v:67:y:2008:i:2:p:381-393

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  1. Kühn, Kai-Uwe & Machado, Matilde Pinto, 2004. "Bilateral Market Power and Vertical Integration in the Spanish Electricity Spot Market," CEPR Discussion Papers 4590, C.E.P.R. Discussion Papers.
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Citations

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Cited by:
  1. Azadeh, A. & Skandari, M.R. & Maleki-Shoja, B., 2010. "An integrated ant colony optimization approach to compare strategies of clearing market in electricity markets: Agent-based simulation," Energy Policy, Elsevier, vol. 38(10), pages 6307-6319, October.
  2. Giorgio Fagiolo & Andrea Roventini, 2008. "On the Scientific Status of Economic Policy: A Tale of Alternative Paradigms," LEM Papers Series 2008/03, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  3. Albert Banal-Estañol & Augusto Rupérez-Micola, 2010. "Are Agent-based Simulations Robust? The Wholesale Electricity Trading Case," Working Papers 443, Barcelona Graduate School of Economics.
  4. Weidlich, Anke & Veit, Daniel, 2008. "A critical survey of agent-based wholesale electricity market models," Energy Economics, Elsevier, vol. 30(4), pages 1728-1759, July.
  5. Augusto Rupérez-Micola & Albert Banal-Estañol, 2007. "Composition of electricity generation portfolios, pivotal dynamics and market prices," Economics Working Papers 1083, Department of Economics and Business, Universitat Pompeu Fabra.
  6. Safarzynska, Karolina & van den Bergh, Jeroen C.J.M., 2011. "Industry evolution, rational agents and the transition to sustainable electricity production," Energy Policy, Elsevier, vol. 39(10), pages 6440-6452, October.
  7. Banal-Estañol, Albert & Rupérez Micola, Augusto, 2011. "Behavioural simulations in spot electricity markets," European Journal of Operational Research, Elsevier, vol. 214(1), pages 147-159, October.
  8. Anke Weidlich & Daniel Veit, 2008. "Agent-Based Simulations for Electricity Market Regulation Advice: Procedures and an Example," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 228(2+3), pages 149-172, June.

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