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The Models of Strategic Interaction between Network and Generating Companies at Electricity Transmission Market

Author

Listed:
  • Vassiliev, M.

    (ESI, Irkutsk, Russia)

  • Filatov, A.

    (ISU, Irkutsk, Russia)

Abstract

The paper considers the strategic interaction between network and generating companies at electricity transmission market within the simplest electric power system with two nodes. The four possible variants of the market organization are investigated: guaranteed regulated and non-regulated network monopoly, network monopoly facing potential competition from the independent network company or generating company. The possible consequences and by-effects of vertical unbundling, in particular, influence of such a regulation on the prices and network transfer capabilities, are analyzed. It is shown that the elimination of monopolistic preferences on electric power transmission with the possibility of network objects building and operation by the generating companies is an effective mechanism for electricity price reduction.

Suggested Citation

  • Vassiliev, M. & Filatov, A., 2011. "The Models of Strategic Interaction between Network and Generating Companies at Electricity Transmission Market," Journal of the New Economic Association, New Economic Association, issue 10, pages 54-73.
    • Handle: RePEc:nea:journl:y:2011:i:10:p:54-73
    as

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    References listed on IDEAS

    as
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    4. Joskow, Paul L., 2007. "Regulation of Natural Monopoly," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 2, chapter 16, pages 1227-1348, Elsevier.
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    7. Paul L. Joskow, 2010. "Market Imperfections versus Regulatory Imperfections," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 8(3), pages 3-7, October.
    8. DiLorenzo, Thomas J, 1996. "The Myth of Natural Monopoly," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 9(2), pages 43-58.
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    More about this item

    Keywords

    oligopoly; monopoly; strategic interaction; potential competition; Nash equilibrium; electricity transmission market;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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