Market Power in the England and Wales Wholesale Electricity Market 1995-2000
AbstractThis paper shows that generators exercised increasing market power in the England and Wales wholesale electricity market in the second half of the 1990s despite declining market concentration. It examines whether this was consistent with static, non-cooperative oligopoly models, which are widely used to model electricity markets, by testing the static Nash equilibrium assumption that each generator chose its bids to maximise its current profits taking the bids of other generators as given. It finds a significant change in behaviour in late 1996. In 1995 and 1996 generator behaviour was consistent with the static Nash equilibrium assumption if the majority of their output was covered by financial contracts which hedged prices. After 1996 their behaviour was inconsistent with the static Nash equilibrium assumption given their contract cover but it was consistent with tacit collusion.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0455.
Date of creation: Oct 2004
Date of revision:
Contact details of provider:
Web page: http://www.econ.cam.ac.uk/index.htm
static oligopoly models; market power; Nash equilibrium; tacit collusion; electricity markets;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-10-21 (All new papers)
- NEP-BEC-2004-10-21 (Business Economics)
- NEP-COM-2004-10-21 (Industrial Competition)
- NEP-MIC-2004-10-21 (Microeconomics)
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.:
- Green, Richard, 1999. "The Electricity Contract Market in England and Wales," Journal of Industrial Economics, Wiley Blackwell, vol. 47(1), pages 107-24, March.
- Green, Richard J & Newbery, David M, 1992.
"Competition in the British Electricity Spot Market,"
Journal of Political Economy,
University of Chicago Press, vol. 100(5), pages 929-53, October.
- Green, Richard & Newbery, David M G, 1991. "Competition in the British Electricity Spot Market," CEPR Discussion Papers 557, C.E.P.R. Discussion Papers.
- von der Fehr, Nils-Henrik Morch & Harbord, David, 1993.
"Spot Market Competition in the UK Electricity Industry,"
Royal Economic Society, vol. 103(418), pages 531-46, May.
- Von der Fehr, N.H.M. & Harbord, D., 1992. "Spot Market Competition in the UK Electricity Industry," Memorandum 09/1992, Oslo University, Department of Economics.
- Severin Borenstein & James B. Bushnell & Frank A. Wolak, 2002. "Measuring Market Inefficiencies in California's Restructured Wholesale Electricity Market," American Economic Review, American Economic Association, vol. 92(5), pages 1376-1405, December.
- Green, Richard J, 1996. "Increasing Competition in the British Electricity Spot Market," Journal of Industrial Economics, Wiley Blackwell, vol. 44(2), pages 205-16, June.
- Mark Armstrong & Simon Cowan & John Vickers, 1994. "Regulatory Reform: Economic Analysis and British Experience," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510790, June.
- Natalia Fabra & Juan Toro, 2003.
"The Fall in British Electricity Prices: Market Rules, Market Structure, or Both?,"
- Fabra, Natalia & Toro, Juan, . "The Fall in British Electricity Prices: Market Rules, Market Structure, or Both?," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/5016, Universidad Carlos III de Madrid.
- Natalia Fabra, 2003. "Tacit Collusion in Repeated Auctions: Uniform Versus Discriminatory," Journal of Industrial Economics, Wiley Blackwell, vol. 51(3), pages 271-293, 09.
- Rafael Macatangay, 2002. "Tacit Collusion in the Frequently Repeated Multi-Unit Uniform Price Auction for Wholesale Electricity in England and Wales," European Journal of Law and Economics, Springer, vol. 13(3), pages 257-273, May.
- Green, R., 2004.
"‘Did English Generators Play Cournot? Capacity Withholding in the Electricity Pool’,"
Cambridge Working Papers in Economics
0425, Faculty of Economics, University of Cambridge.
- Richard Green, 2004. "Did English Generators Play Cournot? Capacity withholding in the Electricity Pool," Working Papers 0410, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
- Roques, F. & Newbery, D.M. & Nuttall, W.J., 2004. "Generation Adequacy and Investment Incentives in Britain: from the Pool to NETA," Cambridge Working Papers in Economics 0459, Faculty of Economics, University of Cambridge.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Howard Cobb).
If references are entirely missing, you can add them using this form.