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Using restructured electricity supply industries to understand oligopoly industry outcomes

  • Wolak, Frank A.
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    This paper argues that many determinants of generic oligopoly market outcomes can be studied in bid-based wholesale electricity markets under much weaker assumptions than in other oligopoly industries because of their rich data, regulatory history, and clearly specified market rules. These methods are compared to those used in existing studies of oligopolistic industries where the best data available are market-clearing prices and quantities and demand and cost shifters. The extent to which the methods used in bid-based wholesale electricity markets generalize conventional methods is explained in detail and major applications of these techniques are summarized. Lessons from the study of wholesale electricity markets for the monitoring and design of other oligopolistic markets are also discussed.

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    File URL: http://www.sciencedirect.com/science/article/B6VFT-51KRPGW-2/2/eac2d8e37ed49442dc30ffcdcdcddada
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    Article provided by Elsevier in its journal Utilities Policy.

    Volume (Year): 18 (2010)
    Issue (Month): 4 (December)
    Pages: 227-246

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    Handle: RePEc:eee:juipol:v:18:y:2010:i:4:p:227-246
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30478

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    1. Aviv Nevo, 2003. "Measuring Market Power in the Ready-to-Eat Cereal Industry," Microeconomics 0303006, EconWPA.
    2. 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.
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    4. Shaun D. MCRAE & Frank A. WOLAK, 2009. "How Do Firms Exercise Unilateral Market Power? Evidence from a Bid-Based Wholesale Electricity Market," RSCAS Working Papers 2009/36, European University Institute.
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    7. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
    8. Klemperer, Paul D & Meyer, Margaret A, 1989. "Supply Function Equilibria in Oligopoly under Uncertainty," Econometrica, Econometric Society, vol. 57(6), pages 1243-77, November.
    9. Mansur, Erin T, 2007. "Upstream Competition and Vertical Integration in Electricity Markets," Journal of Law and Economics, University of Chicago Press, vol. 50(1), pages 125-56, February.
    10. Franklin M. Fisher, 1989. "Games Economists Play: A Noncooperative View," RAND Journal of Economics, The RAND Corporation, vol. 20(1), pages 113-124, Spring.
    11. Bushnell, James & Mansur, Erin T. & Saravia, Celeste, 2008. "Vertical Arrangements, Market Structure and Competition: An Analysis of Restructured U.S. Electricity Markets," Staff General Research Papers 13130, Iowa State University, Department of Economics.
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