Let's Get Physical! Or Financial? A Study of Electricity Transmission Rights
I test experimentally the predictions of neoclassical theory for a radial electricity market without rights to the transmission line, with rights that give the owner a financial right to a share of the transmission congestion charges collected by a network operator, and with physical rights which give the owner the exclusive right to utilize a portion of the transmission line. I find that physical rights lead to more "right" market signals, diminish some market-power, and remove an uncertainty about electricity transmission congestion better than financial rights or the absence of rights.
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