The More Cooperation, the More Competition? A Cournot Analysis of the Benefits of Electric Market Coupling
AbstractMarket coupling in Belgian and Dutch markets would permit more efficient use of intercountry transmission, 1) by counting only net flows against transmission limits, 2) by improving access to the Belgian market, and 3) by eliminating the mismatch in timing between interface auctions and the energy spot market. A Cournot market model that accounts for the region’s transmission pricing rules and limitations is used to simulate market outcomes with and without market coupling. This accounts for 1) and 2). Market coupling improves social surplus in the order of 108 €/year, unless it encourages the largest producer in the region to switch from a price-taking strategy in Belgium to a Cournot strategy due to a perceived diminishment of the threat of regulatory intervention. Benefit to Dutch consumers depends on the behavior of this company. The results illustrate how large-scale oligopoly models can be useful for assessing market integration.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0509.
Date of creation: Jan 2005
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Electric power; Electric transmission; Liberalization; Oligopoly; Complementarity models; Computational models; Netherlands; Belgium; France; Germany; Market Coupling;
Other versions of this item:
- Benjamin F. Hobbs & Fieke A.M. Rijkers & Maroeska G. Boots, 2005. "The More Cooperation, The More Competition? A Cournot Analysis of the Benefits of Electric Market Coupling," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 69-98.
- F0 - International Economics - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-02-01 (All new papers)
- NEP-CMP-2005-02-01 (Computational Economics)
- NEP-COM-2005-02-01 (Industrial Competition)
- NEP-ENE-2005-02-01 (Energy Economics)
- NEP-IND-2005-02-01 (Industrial Organization)
- NEP-MIC-2005-02-01 (Microeconomics)
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