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The impact of regulation on pricing behavior in the Spanish electricity market (2002–2005)

  • Ciarreta, Aitor
  • Espinosa, María Paz

In this paper we measure the impact of regulatory measures which affected the Spanish electricity wholesale market between 2002 and 2005. Our approach is based on the fact that regulation changes incentives for firms and therefore their market behavior. In the absence of any regulation, firms would choose profit-maximizing prices on their residual demands so that the observed gap between optimal and actual prices provides a measure of the effect of regulation. Our results indicate that regulation has decreased wholesale prices considerably, but became less effective at the end of the sample period which explains the regulatory regime change introduced in 2006.

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Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 34 (2012)
Issue (Month): 6 ()
Pages: 2039-2045

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Handle: RePEc:eee:eneeco:v:34:y:2012:i:6:p:2039-2045
Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

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  1. Aitor Ciarreta & María Espinosa, 2010. "Market power in the Spanish electricity auction," Journal of Regulatory Economics, Springer, vol. 37(1), pages 42-69, February.
  2. Frank A. Wolak, 2003. "Measuring Unilateral Market Power in Wholesale Electricity Markets: The California Market, 1998–2000," American Economic Review, American Economic Association, vol. 93(2), pages 425-430, May.
  3. Kai-Uwe Kühn & Matilde Machado, 2004. "Bilateral Market Power And Vertical Integration In The Spanish Electricity Spot Market," Working Papers wp2004_0414, CEMFI.
  4. von der Fehr, Nils-Henrik Morch & Harbord, David, 1993. "Spot Market Competition in the UK Electricity Industry," Economic Journal, Royal Economic Society, vol. 103(418), pages 531-46, May.
  5. Frank Wolak, 2000. "An Empirical Analysis of the Impact of Hedge Contracts on Bidding Behavior in a Competitive Electricity Market," International Economic Journal, Taylor & Francis Journals, vol. 14(2), pages 1-39.
  6. Severin Borenstein & James B. Bushnell & Frank A. Wolak, 2002. "Measuring Market Inefficiencies in California's Restructured Wholesale Electricity Market," American Economic Review, American Economic Association, vol. 92(5), pages 1376-1405, December.
  7. 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.
  8. Green, Richard, 1999. "The Electricity Contract Market in England and Wales," Journal of Industrial Economics, Wiley Blackwell, vol. 47(1), pages 107-24, March.
  9. Ali Hortaçsu & Steven L. Puller, 2008. "Understanding strategic bidding in multi-unit auctions: a case study of the Texas electricity spot market," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 86-114.
  10. Ciarreta, Aitor & Gutierrez-Hita, Carlos, 2006. "Supply function vs. quantity competition in supergames," International Journal of Industrial Organization, Elsevier, vol. 24(4), pages 773-783, July.
  11. Aitor Ciarreta & Maria Paz Espinosa, 2010. "Supply Function Competition in the Spanish Wholesale Electricity Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 137-158.
  12. Green, Richard J, 1996. "Increasing Competition in the British Electricity Spot Market," Journal of Industrial Economics, Wiley Blackwell, vol. 44(2), pages 205-16, June.
  13. Catherine D. Wolfram, 1999. "Measuring Duopoly Power in the British Electricity Spot Market," American Economic Review, American Economic Association, vol. 89(4), pages 805-826, September.
  14. Vitor Marques & Isabel Soares & Adelino Fortunato, 2008. "Measuring market power in the Iberian electricity wholesale market through the residual demand curve," CEF.UP Working Papers 0801, Universidade do Porto, Faculdade de Economia do Porto.
  15. Allaz Blaise & Vila Jean-Luc, 1993. "Cournot Competition, Forward Markets and Efficiency," Journal of Economic Theory, Elsevier, vol. 59(1), pages 1-16, February.
  16. Tamaschke, R. & Docwra, G. & Stillman, R., 2005. "Measuring market power in electricity generation: A long-term perspective using a programming model," Energy Economics, Elsevier, vol. 27(2), pages 317-335, March.
  17. Furió, Dolores & Lucia, Julio J., 2009. "Congestion management rules and trading strategies in the Spanish electricity market," Energy Economics, Elsevier, vol. 31(1), pages 48-60, January.
  18. Crampes , C. & Fabra , N., 2005. "The Spanish Electricity Industry: Plus ça change …," Cambridge Working Papers in Economics 0502, Faculty of Economics, University of Cambridge.
  19. Natalia Fabra, 2003. "Tacit Collusion in Repeated Auctions: Uniform Versus Discriminatory," Journal of Industrial Economics, Wiley Blackwell, vol. 51(3), pages 271-293, 09.
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