Optimal Willingness to Supply Wholesale Electricity under Asymmetric Linearized Marginal Costs
This analysis derives the profit-maximizing willingness to supply functions for singleplant and multi-plant wholesale electricity suppliers that all incur linear marginal costs. The optimal strategy must result in linear residual demand functions in the absence of capacity constraints. This necessarily leads to a linear pricing rule structure that can be used by firm managers to construct their offer curves and to serve as a benchmark to evaluate firm profit-maximizing behavior. The procedure derives the cost functions and the residual demand curves for merged or multi-plant generators, and uses these to construct the individual generator plant offer curves for a multi-plant firm.
Volume (Year): 2 (2012)
Issue (Month): 4 ()
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- Holmberg, Pär & Newbery, David & Ralph, Daniel, 2009.
"Supply Function Equilibria: Step Functions and Continuous Representations,"
Working Paper Series
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1007, University of Guelph, Department of Economics and Finance.
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