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Capacity choice, technology mix and market power

  • Meunier, Guy

This paper investigates strategic capacity choices in electricity markets comprised of heterogeneous firms. Long term strategic investments are analyzed assuming that the wholesale market is competitive. There are two technologies available to produce electricity; both are efficient and used at a first best optimum. When not all firms can invest in both technologies, there can be over investment in either of these technologies. It is shown that if the number of firms that can invest in a particular technology is limited, the development of competition solely using the other technology can decrease welfare.

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Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 32 (2010)
Issue (Month): 6 (November)
Pages: 1306-1315

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Handle: RePEc:eee:eneeco:v:32:y:2010:i:6:p:1306-1315
Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

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  11. Roques, F.A. & Nuttall, W.J. & Newbery, D.M. & de Neufville, R., 2005. "Nuclear Power: a Hedge against Uncertain Gas and Carbon Prices?," Cambridge Working Papers in Economics 0555, Faculty of Economics, University of Cambridge.
  12. Michael A. Crew & Paul R. Kleindorfer, 1976. "Peak Load Pricing with a Diverse Technology," Bell Journal of Economics, The RAND Corporation, vol. 7(1), pages 207-231, Spring.
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