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Capacity precommitment, price competition and forward markets

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  • Ferreira, José Luis

Abstract

The Cournot model can be seen as a reduced form of a more realistic model of capacity choice followed by price competition. We show that this is not the case if forward markets are added as their pro-competitive effects no longer hold.

Suggested Citation

  • Ferreira, José Luis, 2014. "Capacity precommitment, price competition and forward markets," Economics Letters, Elsevier, vol. 122(2), pages 362-364.
    • Handle: RePEc:eee:ecolet:v:122:y:2014:i:2:p:362-364
    DOI: 10.1016/j.econlet.2013.12.013
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    References listed on IDEAS

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    1. Moreno, Diego & Ubeda, Luis, 2006. "Capacity precommitment and price competition yield the Cournot outcome," Games and Economic Behavior, Elsevier, vol. 56(2), pages 323-332, August.
    2. Ferreira, Jose Luis, 2003. "Strategic interaction between futures and spot markets," Journal of Economic Theory, Elsevier, vol. 108(1), pages 141-151, January.
    3. Ressner, Ludwig & Liski, Matti & Montero, Juan-Pablo, 2010. "Corrigendum to "Forward trading and collusion in oligopoly" [J. Econ. Theory 131 (1) (2006) 212-230]," Journal of Economic Theory, Elsevier, vol. 145(6), pages 2496-2497, November.
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    Cited by:

    1. David P. Brown & David E. M. Sappington, 2023. "Employing gain-sharing regulation to promote forward contracting in the electricity sector," Journal of Regulatory Economics, Springer, vol. 63(1), pages 30-56, April.
    2. David P. Brown and Andrew Eckert, 2020. "Imperfect Competition in Electricity Markets with Renewable Generation: The Role of Renewable Compensation Policies," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 61-88.
    3. David P. Brown & Andrew Eckert, 2018. "Analyzing the Impact of Electricity Market Structure Changes and Mergers: The Importance of Forward Commitments," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 52(1), pages 101-137, February.

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