Cournot competition in the electricity market with transmission constraints
AbstractThis paper studies the market power of generators in the electricity market when transmission capacity is scarce. We consider a simple world of two generators providing electricity to their consumers through a single transmission line. In the literature, different Cournot equilibrium concepts have been developed. This paper applies these concepts and explains the implicit assumptions on the behavior of the System Operator made in those papers. We show that these implicit assumptions are not realistic. For an alternative role of the System Operator, we solve the Cournot equilibrium and compare the outcome. Furthermore, we show that the axiomatic equilibrium concept of Smeers and Wei (1997) is linked with the model of Oren (1997) and can also be defined as a Nash Equilibrium.
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Bibliographic InfoPaper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment in its series Energy, Transport and Environment Working Papers Series with number ete0004.
Length: 35 pages
Date of creation: Nov 2000
Date of revision:
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Other versions of this item:
- Bert Willems, 2000. "Cournot Competition in the Electricity Market with Transmission Constraints," Center for Economic Studies - Discussion papers ces0024, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
- NEP-ALL-2001-11-27 (All new papers)
- NEP-ENE-2001-11-27 (Energy Economics)
- NEP-ENT-2001-11-27 (Entrepreneurship)
- NEP-MIC-2001-11-27 (Microeconomics)
- NEP-NET-2001-11-27 (Network Economics)
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- Robert Wilson, 2005.
"Supply Function Equilibrium in a Constrained Transmission System,"
784828000000000087, UCLA Department of Economics.
- Wilson, Robert B., 2007. "Supply Function Equilibrium in a Constrained Transmission System," Research Papers 1966, Stanford University, Graduate School of Business.
- Daniel A. Benitez, 2004. "On Quantity Competition and Transmission Constraints in Electricity Market," Econometric Society 2004 Latin American Meetings 98, Econometric Society.
- Guido Pepermans & Bert Willems, 2005.
"The Potential Impact of Cross-Ownership in Transmission: an Application to the Belgian Electricity Market,"
Center for Economic Studies - Discussion papers
ces0503, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
- Guido Pepermans & Bert Willems, 2005. "The potential impact of cross-ownership in transmission: An application to the Belgian electricity market," Energy, Transport and Environment Working Papers Series ete0501, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment.
- Guido Pepermans & Bert Willems, 2004. "Ramsey Pricing in a Congested Network with Market Power in Generation: A Numerical Illustration for Belgium," Energy, Transport and Environment Working Papers Series ete0408, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment.
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