Strategic Behavior and Collusion: An Application to the Spanish Electricity Market
AbstractThe paper has two major contributions to the theory of repeated games. First, we build a supergame oligopoly model where firms compete in supply functions, we show how collusion sustainability is affected by the presence of a convex cost function, the magnitude of both the slope of demand market, and the number of rivals. Then, we compare the results with those of the traditional Cournot reversion under the same structural characteristics. We find how depending on the number of firms and the slope of the linear demand, collusion sustainability is easier under supply function than under Cournot competition. The conclusions of the models are simulated with data from the Spanish wholesale electricity market to predict lower bounds of the discount factors.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of the Basque Country - Department of Foundations of Economic Analysis II in its series DFAEII Working Papers with number 2005-02.
Date of creation: Oct 2004
Date of revision:
Postal: Dpto. de Fundamentos del Análisis Económico II, = Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
Find related papers by JEL classification:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-02-01 (All new papers)
- NEP-COM-2005-02-01 (Industrial Competition)
- NEP-ENE-2005-02-01 (Energy Economics)
- NEP-GTH-2005-02-01 (Game Theory)
- NEP-IND-2005-02-01 (Industrial Organization)
- NEP-MIC-2005-02-01 (Microeconomics)
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, 2003.
"Failing electricity markets: should we shoot the pools?,"
Elsevier, vol. 11(3), pages 155-167, September.
- Green, Richard, 2001. "Failing Electricity Markets: Should we Shoot the Pools?," CEPR Discussion Papers 3010, C.E.P.R. Discussion Papers.
- Severin Borenstein & James Bushnell, 1998.
"An Empirical Analysis of the Potential for Market Power in California's Electricity Industry,"
NBER Working Papers
6463, National Bureau of Economic Research, Inc.
- Borenstein, Severin & Bushnell, James, 1999. "An Empirical Analysis of the Potential for Market Power in California's Electricity Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 47(3), pages 285-323, September.
- Powell, Andrew, 1993. "Trading Forward in an Imperfect Market: The Case of Electricity in Britain," Economic Journal, Royal Economic Society, vol. 103(417), pages 444-53, March.
- Bolle, Friedel, 1992. "Supply function equilibria and the danger of tacit collusion : The case of spot markets for electricity," Energy Economics, Elsevier, vol. 14(2), pages 94-102, April.
- Green, Richard, 1999. "The Electricity Contract Market in England and Wales," Journal of Industrial Economics, Wiley Blackwell, vol. 47(1), pages 107-24, March.
- Klemperer, Paul D & Meyer, Margaret A, 1989. "Supply Function Equilibria in Oligopoly under Uncertainty," Econometrica, Econometric Society, vol. 57(6), pages 1243-77, November.
- repec:ebl:ecbull:v:12:y:2004:i:3:p:1-6 is not listed on IDEAS
- Natalia Fabra, 2003. "Tacit Collusion in Repeated Auctions: Uniform Versus Discriminatory," Journal of Industrial Economics, Wiley Blackwell, vol. 51(3), pages 271-293, 09.
- Borenstein, Severin & Bushnell, James & Kahn, Edward & Stoft, Steven, 1995. "Market power in California electricity markets," Utilities Policy, Elsevier, vol. 5(3-4), pages 219-236.
- Frank A. Wolak, 2003. "Measuring Unilateral Market Power in Wholesale Electricity Markets: The California Market, 1998–2000," American Economic Review, American Economic Association, vol. 93(2), pages 425-430, May.
- Green, Richard J, 1996. "Increasing Competition in the British Electricity Spot Market," Journal of Industrial Economics, Wiley Blackwell, vol. 44(2), pages 205-16, June.
- Eva Jansson, 0. "Deregulation, property rights, and legal system," European Journal of Law and Economics, Springer, vol. 0, pages 1-25.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alcira Macías Redondo).
If references are entirely missing, you can add them using this form.