Quantity versus Price Competition in the Deregulated Finnish Electricity Markets
AbstractThe main motivation to deregulate Finnish electricity markets and introduce competition to the industry was to improve efficiency and obtain lower prices. In this paper we use a numerical simulation model in order to analyse the impact of market structure to the wholesale price of electricity. We solve Cournot equilibrium and Bertrand equilibrium. The results indicate that in some circumstances deregulation might actually lead to higher prices instead of lower ones. This happens if Cournot competition is realised and consumers do not react to the competition by becoming more price sensitive. If, however, price elasticity of demand increases deregulation will lead to the lower prices and higher production regardless of the market structure.
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Bibliographic InfoArticle provided by Finnish Economic Association in its journal Finnish Economic Papers.
Volume (Year): 16 (2003)
Issue (Month): 2 (Autumn)
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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