Price Wars and Collusion in the Spanish Electricity Market
AbstractWe analyze the pattern of pool prices in the Spanish electricity market during 1998 by means of a Time Varying Transition Probabilities Markov switching model. Our purpose is twofold: firstly, to identify and date the drops in prices that cannot be accounted for by supply nor demand conditions; and secondly, under the assumption that these correspond with reversions to noncooperative behaviour, to identify the trigger variables upon which a collusive equilibrium could be based upon. Our results confirm the hypothesis that two distinct price levels characterize the time series of pool prices, and point to the conclusion that price wars are induced by changes in the major generators' market shares. In turn, this shows that firms' pricing behaviour is highly influenced by the way in which the socalled Competition Transition Charges (CTCs) are computed.
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Bibliographic InfoPaper provided by Centro de Estudios Andaluces in its series Economic Working Papers at Centro de Estudios Andaluces with number E2001/05.
Length: 35 pages
Date of creation: 2001
Date of revision:
Electricity Markets; Tacit Collusion; Markov Switching;
Other versions of this item:
- Fabra, Natalia & Toro, Juan, 2005. "Price wars and collusion in the Spanish electricity market," International Journal of Industrial Organization, Elsevier, vol. 23(3-4), pages 155-181, April.
- Natalia Fabra & Juan Toro, 2002. "Price Wars and Collusion in the Spanish Electricity Market," Industrial Organization 0212001, EconWPA, revised 31 Aug 2003.
- Juan Toro & Natalia Fabra, 2002. "Price Wars and Collusion in the Spanish Electricity Market," Economics Series Working Papers 136, University of Oxford, Department of Economics.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-03-10 (All new papers)
- NEP-COM-2003-03-10 (Industrial Competition)
- NEP-ENE-2003-03-10 (Energy Economics)
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