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.
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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)
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