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Using restructured electricity supply industries to understand oligopoly industry outcomes

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  • Wolak, Frank A.
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    Abstract

    This paper argues that many determinants of generic oligopoly market outcomes can be studied in bid-based wholesale electricity markets under much weaker assumptions than in other oligopoly industries because of their rich data, regulatory history, and clearly specified market rules. These methods are compared to those used in existing studies of oligopolistic industries where the best data available are market-clearing prices and quantities and demand and cost shifters. The extent to which the methods used in bid-based wholesale electricity markets generalize conventional methods is explained in detail and major applications of these techniques are summarized. Lessons from the study of wholesale electricity markets for the monitoring and design of other oligopolistic markets are also discussed.

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    Bibliographic Info

    Article provided by Elsevier in its journal Utilities Policy.

    Volume (Year): 18 (2010)
    Issue (Month): 4 (December)
    Pages: 227-246

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    Handle: RePEc:eee:juipol:v:18:y:2010:i:4:p:227-246

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    Web page: http://www.elsevier.com/locate/inca/30478

    Related research

    Keywords: Electricity market design Electricity auction design Market performance measurement Diagnosing market power;

    References

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    1. Franklin M. Fisher, 1989. "Games Economists Play: A Noncooperative View," RAND Journal of Economics, The RAND Corporation, vol. 20(1), pages 113-124, Spring.
    2. Aviv Nevo, 2000. "Mergers with Differentiated Products: The Case of the Ready-to-Eat Cereal Industry," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 395-421, Autumn.
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    4. James B. Bushnell & Erin T. Mansur & Celeste Saravia, 2007. "Vertical Arrangements, Market Structure, and Competition An Analysis of Restructured U.S. Electricity Markets," NBER Working Papers 13507, National Bureau of Economic Research, Inc.
    5. Klemperer, Paul D & Meyer, Margaret A, 1989. "Supply Function Equilibria in Oligopoly under Uncertainty," Econometrica, Econometric Society, vol. 57(6), pages 1243-77, November.
    6. Ali Hortaçsu & Steven L. Puller, 2008. "Understanding strategic bidding in multi-unit auctions: a case study of the Texas electricity spot market," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 86-114.
    7. Rosse, James N, 1970. "Estimating Cost Function Parameters without Using Cost Data: Illustrated Methodology," Econometrica, Econometric Society, vol. 38(2), pages 256-75, March.
    8. Frank Wolak, 2000. "An Empirical Analysis of the Impact of Hedge Contracts on Bidding Behavior in a Competitive Electricity Market," International Economic Journal, Taylor & Francis Journals, vol. 14(2), pages 1-39.
    9. Mansur, Erin T, 2007. "Upstream Competition and Vertical Integration in Electricity Markets," Journal of Law and Economics, University of Chicago Press, vol. 50(1), pages 125-56, February.
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    Cited by:
    1. Daisy Shen & Qing Yang, . "Electricity Market Regulatory Reform and Competition – Case Study of the New Zealand Electricity Market," Chapters, Economic Research Institute for ASEAN and East Asia (ERIA).
    2. Bosco, Bruno & Parisio, Lucia & Pelagatti, Matteo, 2012. "Strategic bidding in vertically integrated power markets with an application to the Italian electricity auctions," Energy Economics, Elsevier, vol. 34(6), pages 2046-2057.

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