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Strategic Bidding in Electricity Pools with Short-Lived Bids: An Application to the Spanish Market

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  • García-Díaz, Antón
  • Marín Uribe, Pedro Luis
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    Abstract

    We 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 Info

    Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2567.

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    Date of creation: Sep 2000
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    Handle: RePEc:cpr:ceprdp:2567

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    Related research

    Keywords: Bids; Electricity Pools; Market Power;

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    Cited by:
    1. Natalia Fabra & Nils‐Henrik Fehr & David Harbord, 2006. "Designing electricity auctions," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 23-46, 03.
    2. Aitor Ciarreta & María Paz Espinosa, 2003. "Market Power In The Spanish Wholesale Electricity Market," Working Papers. Serie AD 2003-22, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    3. Rajnish Kamat & Shmuel Oren, 2004. "Two-settlement Systems for Electricity Markets under Network Uncertainty and Market Power," Journal of Regulatory Economics, Springer, vol. 25(1), pages 5-37, January.

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