The Models of Strategic Interaction between Network and Generating Companies at Electricity Transmission Market
AbstractThe paper considers the strategic interaction between network and generating companies at electricity transmission market within the simplest electric power system with two nodes. The four possible variants of the market organization are investigated: guaranteed regulated and non-regulated network monopoly, network monopoly facing potential competition from the independent network company or generating company. The possible consequences and by-effects of vertical unbundling, in particular, influence of such a regulation on the prices and network transfer capabilities, are analyzed. It is shown that the elimination of monopolistic preferences on electric power transmission with the possibility of network objects building and operation by the generating companies is an effective mechanism for electricity price reduction.
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Bibliographic InfoArticle provided by New Economic Association in its journal Journal of the New Economic Association.
Volume (Year): (2011)
Issue (Month): 10 ()
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oligopoly; monopoly; strategic interaction; potential competition; Nash equilibrium; electricity transmission market;
Find related papers by JEL classification:
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
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- Joskow, Paul L., 2007. "Regulation of Natural Monopoly," Handbook of Law and Economics, Elsevier.
- DiLorenzo, Thomas J, 1996. " The Myth of Natural Monopoly," The Review of Austrian Economics, Springer, vol. 9(2), pages 43-58.
- Mehdi Farsi & Aurelio Fetz & Massimo Filippini, 2008. "Economies of Scale and Scope in Multi-Utilities," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 123-144.
- Paul L. Joskow, 2010. "Market Imperfections versus Regulatory Imperfections," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 8(3), pages 3-7, October.
- Joskow Paul L., 2008. "Incentive Regulation and Its Application to Electricity Networks," Review of Network Economics, De Gruyter, vol. 7(4), pages 1-14, December.
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