The Effect of Divestitures in the German Electricity Market
AbstractIn the most liberalized electricity markets, abuse of market power is a concern related to oligopolistic market structures, flaws in market architecture, and the specific characteristics of electricity generation and demand. Several methods have been suggested to improve the competitiveness of the liberalized electricity markets and to reallocate rents from generators to consumers. In this paper we study to what extend divestitures can improve the competitiveness of the electricity market. We quantify the expected developments under different divestiture scenarios for the German market, using Cournot and Supply Function Equilibrium simulations. We find an overall welfare gain in both models and show that those gains are highest if the divested assets are sold to independent and small firms, preventing the formation of additional firms that set prices strategically.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2011-034.
Date of creation: 2011
Date of revision:
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Web page: http://center.uvt.nl
Supply Function Equilibrium; Cournot competition; electricity markets; divestitures;
Other versions of this item:
- Weigt, H. & Willems, Bert, 2011. "The Effect of Divestitures in the German Electricity Market," Discussion Paper 2011-020, Tilburg University, Tilburg Law and Economic Center.
- L - Industrial Organization
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-09 (All new papers)
- NEP-CMP-2011-04-09 (Computational Economics)
- NEP-ENE-2011-04-09 (Energy Economics)
- NEP-REG-2011-04-09 (Regulation)
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 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.
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