Price Wars and Collusion in the Spanish Electricity Market
Abstract\We analyze the time-series of prices in the Spanish electricity market by means of a time varying-transition-probability Markov switching model. Accounting for changes in demand and cost conditions (which reflect changes in input costs, capacity availability and hydro power), we show that the time-series of prices is characterized by two significantly different price levels. Based on a Green and Porter (1984)'s type of model that introduces several institutional details, we construct trigger variables that affect the likelihood of starting a price war. By interpreting the signs of the triggers, we are able to infer some of the properties of the collusive strategy that firms might have followed. We obtain more empirical support to Green and Porter's model than previous studies. REVISED: January 2004
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Bibliographic InfoPaper provided by EconWPA in its series Industrial Organization with number 0212001.
Length: 27 pages
Date of creation: 09 Dec 2002
Date of revision: 31 Aug 2003
Note: Type of Document - Tex; prepared on IBM PC -; to print on PostScript; pages: 27
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Electricity Markets; Collusion; Markov Switching;
Other versions of this item:
- Fabra, Natalia & Toro, Juan, 2005. "Price wars and collusion in the Spanish electricity market," International Journal of Industrial Organization, Elsevier, vol. 23(3-4), pages 155-181, April.
- Natalia Fabra & Juan Toro, 2001. "Price Wars and Collusion in the Spanish Electricity Market," Economic Working Papers at Centro de Estudios Andaluces E2001/05, Centro de Estudios Andaluces.
- Juan Toro & Natalia Fabra, 2002. "Price Wars and Collusion in the Spanish Electricity Market," Economics Series Working Papers 136, University of Oxford, Department of Economics.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-12-17 (All new papers)
- NEP-COM-2002-12-17 (Industrial Competition)
- NEP-ENE-2002-12-17 (Energy Economics)
- NEP-IND-2002-12-17 (Industrial Organization)
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