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Estimating Effective Concentration in Deregulated Wholesale Electricity Markets

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  • Richard Schmalensee
  • Bennett W. Golub

Abstract

To inform debates about deregulation of wholesale markets for electricity, we estimate effective concentration in those markets in the contiguous United States in 1978. Our estimates are based on simulated oligopolistic equilibria, the characteristics of which are derived from a new and comprehensive data base. We find, among other things, that effective concentration is highly dependent on the adequacy of transmission capacity in each area, about which usable data are unavailable, and on the behavior of the existing public enterprises in this industry. Policy implications of our findings are discussed.

Suggested Citation

  • Richard Schmalensee & Bennett W. Golub, 1984. "Estimating Effective Concentration in Deregulated Wholesale Electricity Markets," RAND Journal of Economics, The RAND Corporation, vol. 15(1), pages 12-26, Spring.
    • Handle: RePEc:rje:randje:v:15:y:1984:i:spring:p:12-26
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    Cited by:

    1. Severin Borenstein & James Bushnell, 1999. "An Empirical Analysis of the Potential for Market Power in California’s Electricity Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 47(3), pages 285-323, September.
    2. Heim, Sven & Götz, Georg, 2021. "Do Pay-As-Bid Auctions Favor Collusion? Evidence from Germany's market for reserve power," Energy Policy, Elsevier, vol. 155(C).
    3. Cardell, Judith B. & Hitt, Carrie Cullen & Hogan, William W., 1997. "Market power and strategic interaction in electricity networks," Resource and Energy Economics, Elsevier, vol. 19(1-2), pages 109-137, March.
    4. James B. Bushnell & Erin T. Mansur & Celeste Saravia, 2008. "Vertical Arrangements, Market Structure, and Competition: An Analysis of Restructured US Electricity Markets," American Economic Review, American Economic Association, vol. 98(1), pages 237-266, March.
    5. Paul Twomey & Richard Green & Karsten Neuhoff & David Newbery, 2005. "A Review of the Monitoring of Market Power: The Possible Roles of TSOs in Monitoring for Market Power Issues in Congested Transmission Systems," Working Papers 0502, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
    6. Lagarto, João & Sousa, Jorge A.M. & Martins, Álvaro & Ferrão, Paulo, 2014. "Market power analysis in the Iberian electricity market using a conjectural variations model," Energy, Elsevier, vol. 76(C), pages 292-305.
    7. Kühn, Kai-Uwe, 2006. "How Market Fragmentation Can Facilitate Collusion," CEPR Discussion Papers 5948, C.E.P.R. Discussion Papers.
    8. Janssen, Matthias & Wobben, Magnus, 2008. "Electricity Pricing and Market Power - Evidence from Germany," MPRA Paper 11400, University Library of Munich, Germany.
    9. Matthias Janssen & Magnus Wobben, "undated". "Electricity Pricing and Market Power - Evidence from Germany," Working Papers 200121, Institute of Spatial and Housing Economics, Munster Universitary.
    10. Wei Jing-Yuan & Yves Smeers, 1999. "Spatial Oligopolistic Electricity Models with Cournot Generators and Regulated Transmission Prices," Operations Research, INFORMS, vol. 47(1), pages 102-112, February.
    11. Niamh McCarthy, 2005. "Market Size, Market Structure & Market Power in the Irish Electricity Industry," Papers WP168, Economic and Social Research Institute (ESRI).
    12. Bolle, Friedel, 2008. "Allocation decisions in network industries," Energy Economics, Elsevier, vol. 30(1), pages 97-112, January.
    13. Kosnik, Lea, 2008. "Consolidation and ownership trends of nonfederal hydropower generating assets, 1980-2003," Energy Economics, Elsevier, vol. 30(3), pages 715-731, May.
    14. Twomey, Paul & Neuhoff, Karsten, 2010. "Wind power and market power in competitive markets," Energy Policy, Elsevier, vol. 38(7), pages 3198-3210, July.
    15. Hesamzadeh, Mohammad R. & Biggar, Darryl R. & Hosseinzadeh, Nasser, 2011. "The TC-PSI indicator for forecasting the potential for market power in wholesale electricity markets," Energy Policy, Elsevier, vol. 39(10), pages 5988-5998, October.

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