Predicting Market Power in Wholesale Electricity Markets
AbstractThe traditional measure of market power is the HHI, which gives implausible results given the low elasticity of demand in electricity spot markets, unless it is adapted to take account of contracting. In its place the Residual Supply Index has been proposed as a more suitable index to measure potential market power in electricity markets, notably in California and more recently in the EU Sector Inquiry. The paper investigates its value in identifying the ability of firms to raise prices in an electricity market with contracts and capacity constraints and find that it is most useful for the case of a single dominant supplier, or with a natural extension, for the case of a symmetric oligoply. Estimates from the Sector Inquiry seem to fit this case better than might be expected, but suggests an alternative defintion of the RSI defined over flexible output that should give a more reliable relationship.
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 European University Institute in its series RSCAS Working Papers with number 2009/03.
Date of creation: 02 Feb 2009
Date of revision:
Residual Supply Index; Cournot equilibrium; Lerner Index; electricity markets; market power;
Other versions of this item:
- Newbery, D., 2008. "Predicting market power in wholesale electricity markets," Cambridge Working Papers in Economics 0837, Faculty of Economics, University of Cambridge.
- David Newbery, 2009. "Predicting Market Power in Wholesale Electricity Markets," EUI-RSCAS Working Papers 3, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-03-07 (All new papers)
- NEP-COM-2009-03-07 (Industrial Competition)
- NEP-ENE-2009-03-07 (Energy Economics)
- NEP-IND-2009-03-07 (Industrial Organization)
- NEP-LAW-2009-03-07 (Law & Economics)
- NEP-MIC-2009-03-07 (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.:
- Facchini, Giovanni & Mayda, Anna Maria & Mishra, Prachi, 2011.
"Do interest groups affect US immigration policy?,"
Journal of International Economics,
Elsevier, vol. 85(1), pages 114-128, September.
- Giovanni Facchini & Anna Maria Mayda & Prachi Mishra, 2009. "Do Interest Groups affect US Immigration Policy?," CReAM Discussion Paper Series 0904, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
- Giovanni Facchini & Anna Maria Mayda & Prachi Mishra, 2008. "Do Interest Groups Affects US Immigration Policy?," Development Working Papers 256, Centro Studi Luca d\'Agliano, University of Milano.
- Prachi Mishra & Giovanni Facchini & Anna Maria Mayda, 2008. "Do Interest Groups Affect U.S. Immigration Policy?," IMF Working Papers 08/244, International Monetary Fund.
- Facchini, Giovanni & Mayda, Anna Maria & Mishra, Prachi, 2008. "Do Interest Groups Affect US Immigration Policy?," CEPR Discussion Papers 6898, C.E.P.R. Discussion Papers.
- Blume, Lawrence, 2002.
"Stigma and Social Control,"
119, Institute for Advanced Studies.
- David Kreps & Robert Wilson, 1998.
Levine's Working Paper Archive
237, David K. Levine.
- Allaz Blaise & Vila Jean-Luc, 1993. "Cournot Competition, Forward Markets and Efficiency," Journal of Economic Theory, Elsevier, vol. 59(1), pages 1-16, February.
- Vítor Marques & Adelino Fortunato & Isabel Soares, 2010. "Application of a structural model to a wholesale electricity market: The Spanish market from January 1999 to June 2007," GEMF Working Papers 2011-02, GEMF - Faculdade de Economia, Universidade de Coimbra.
- Hesamzadeh, Mohammad R. & Biggar, Darryl R. & Hosseinzadeh, Nasser, 2011. "The TC-PSI indicator for forecasting the potential for market power in wholesale electricity markets," Energy Policy, Elsevier, vol. 39(10), pages 5988-5998, October.
- Vasin, A. & Daylova, E., 2013. "Analysis of the Short-Term Efficiency of Mechanisms of the Wholesale Electricity Market," Journal of the New Economic Association, New Economic Association, vol. 18(2), pages 35-60.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (RSCAS web unit).
If references are entirely missing, you can add them using this form.