Inflow Uncertainty in Hydropower Markets
AbstractIn order to analyse the consequences of uncertainty for prices and efficiency in a hydropower system, we apply a two-period model with uncertainty in water inflow. We study three different market structures, perfect competition, monopoly and oligopoly and stress the importance of the shape of the demand function under different distributions of water inflow. The uncertainty element creates possibilities of exercising market power depending on the distribution of uncertainty among producers. The introduction of thermal power into the hydropower market has an impact on the residual demand function, which is important for the hydropower producers' possibilities of exercising market power.
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Bibliographic InfoPaper provided by Research Department of Statistics Norway in its series Discussion Papers with number 520.
Date of creation: Oct 2007
Date of revision:
hydropower; uncertainty; electricity; thermal power; demand functions; monopoly; duopoly;
Other versions of this item:
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-11-10 (All new papers)
- NEP-ENE-2007-11-10 (Energy Economics)
- NEP-MIC-2007-11-10 (Microeconomics)
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