Strategic Bidding in Electricity Pools with Short-Lived Bids: An Application to the Spanish Market
AbstractWe generalize von der Fehr and Harbord's (1993) multi-unit auction model for the case of a deterministic demand allowing for any technology mix and elastic demand in order to account for demand side bidding. We obtain a general characterization of the equilibrium and show that the Cournot model overestimates market power in pool markets. We simulate the Spanish electricity pool and show that price-cost margins substantially increased with the 1996 merger that took the industry from a six firm structure to its current four firm structure. This is almost equivalent to a nearly symmetric duopoly. The introduction of demand-side bidding is not likely to change this situation.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2567.
Date of creation: Sep 2000
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Find related papers by JEL classification:
- K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
- 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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- Espinosa Alejos, María Paz & Ciarreta Antuñano, Aitor, 2004.
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