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Quantity versus Price Competition in the Deregulated Finnish Electricity Markets


  • Maria Kopsakangas-Savolainen

    (Department of Economics, University of Oulu, Finland)


The main motivation to deregulate Finnish electricity markets and introduce competition to the industry was to improve efficiency and obtain lower prices. In this paper we use a numerical simulation model in order to analyse the impact of market structure to the wholesale price of electricity. We solve Cournot equilibrium and Bertrand equilibrium. The results indicate that in some circumstances deregulation might actually lead to higher prices instead of lower ones. This happens if Cournot competition is realised and consumers do not react to the competition by becoming more price sensitive. If, however, price elasticity of demand increases deregulation will lead to the lower prices and higher production regardless of the market structure.

Suggested Citation

  • Maria Kopsakangas-Savolainen, 2003. "Quantity versus Price Competition in the Deregulated Finnish Electricity Markets," Finnish Economic Papers, Finnish Economic Association, vol. 16(2), pages 51-60, Autumn.
  • Handle: RePEc:fep:journl:v:16:y:2003:i:2:p:51-60

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    References listed on IDEAS

    1. Carl Davidson & Raymond Deneckere, 1986. "Long-Run Competition in Capacity, Short-Run Competition in Price, and the Cournot Model," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 404-415, Autumn.
    2. Severin Borenstein & James Bushnell & Christopher R. Knittel, 1999. "Market Power in Electricity Markets: Beyond Concentration Measures," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 65-88.
    3. Bo Andersson & Lars Bergman, 1995. "Market Structure and the Price of Electricity: An Ex Ante Analysis of the Deregulated Swedish Electricity Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 97-110.
    4. Bolle, Friedel, 1992. "Supply function equilibria and the danger of tacit collusion : The case of spot markets for electricity," Energy Economics, Elsevier, vol. 14(2), pages 94-102, April.
    5. Massimo Filippini, 1999. "Swiss residential demand for electricity," Applied Economics Letters, Taylor & Francis Journals, vol. 6(8), pages 533-538.
    6. Green, Richard J & Newbery, David M, 1992. "Competition in the British Electricity Spot Market," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 929-953, October.
    7. Bergman, Lars & Andersson, Bo, 1995. "Market Structure and the Price of Electricity: An ex ante Analysis of the deregulated Swedish Electricity Market," SSE/EFI Working Paper Series in Economics and Finance 47, Stockholm School of Economics.
    8. Sorgard, Lars, 1997. "Domestic merger policy in an international oligopoly: The Nordic market for electricity," Energy Economics, Elsevier, vol. 19(2), pages 239-253, May.
    9. Klemperer, Paul D & Meyer, Margaret A, 1989. "Supply Function Equilibria in Oligopoly under Uncertainty," Econometrica, Econometric Society, vol. 57(6), pages 1243-1277, November.
    10. Maggi, Giovanni, 1996. "Strategic Trade Policies with Endogenous Mode of Competition," American Economic Review, American Economic Association, vol. 86(1), pages 237-258, March.
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    Cited by:

    1. Johan WILLNER & Sonja GRÖNBLOM, 2015. "The Organisation of Services of General Interest in Finland," CIRIEC Working Papers 1520, CIRIEC - Université de Liège.
    2. Johan Willner & Sonja Gronblom, 2016. "The organisation of services of general interest in Finland," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2016(3), pages 89-116.

    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities


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