Entry into the electricity market: Uncertainty, competition, and mothballing options
The present paper analyzes the entry strategies into the electricity market of two firms that have power plants under price uncertainty and competition. We consider the symmetric and asymmetric two firms, which have either a thermal power plant or a nuclear power plant. The differences between the thermal power plant and the nuclear power plant, such as the cost structure and operational flexibility are modeled. The threshold values of market entry are calculated for each firm with either the thermal power plant or the nuclear power plant as the leader or the follower. We show the dependence of cost structures on entry thresholds of the leader and the follower into the electricity market. For various market and cost conditions, the diagrams of the leader are also shown.
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- Grzegorz Pawlina & Peter M. Kort, 2006.
"Real Options in an Asymmetric Duopoly: Who Benefits from Your Competitive Disadvantage?,"
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- Gollier, Christian & Proult, David & Thais, Françoise & Walgenwitz, Gilles, 2004. "Choice of Nuclear Power Investments ander Price Uncertainty: Valuing Modularity," IDEI Working Papers 270, Institut d'Économie Industrielle (IDEI), Toulouse.
- Gollier, Christian, 2004. "Choice of Nuclear Power Investments under Price Uncertainty: Valuing Modularity," IDEI Working Papers 287, Institut d'Économie Industrielle (IDEI), Toulouse.
- Felipe L. Aguerrevere, 2003. "Equilibrium Investment Strategies and Output Price Behavior: A Real-Options Approach," Review of Financial Studies, Society for Financial Studies, vol. 16(4), pages 1239-1272.
- Steven R. Grenadier, 2002. "Option Exercise Games: An Application to the Equilibrium Investment Strategies of Firms," Review of Financial Studies, Society for Financial Studies, vol. 15(3), pages 691-721.
- Murto, Pauli & Nasakkala, Erkka & Keppo, Jussi, 2004. "Timing of investments in oligopoly under uncertainty: A framework for numerical analysis," European Journal of Operational Research, Elsevier, vol. 157(2), pages 486-500, September. Full references (including those not matched with items on IDEAS)
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