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Strategic Withholding through Production Failures

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  • Sara Fogelberg
  • Ewa Lazarczyk

Abstract

Anecdotal evidence indicates that electricity producers use production failures to disguise strategic reductions of capacity in order to influence prices, but systematic evidence is lacking. We use an instrumental variable approach and data from the Swedish electricity market to examine such behavior. In a market without strategic withholding, reported production failures should not depend directly on the market price. We show that marginal producers in part base their decision to report a failure on prices, which indicates that production failures are a result of economic incentives as well as of technical problems.

Suggested Citation

  • Sara Fogelberg & Ewa Lazarczyk, 2019. "Strategic Withholding through Production Failures," The Energy Journal, , vol. 40(5), pages 247-266, September.
    • Handle: RePEc:sae:enejou:v:40:y:2019:i:5:p:247-266
    DOI: 10.5547/01956574.40.5.sfog
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    References listed on IDEAS

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    1. repec:aen:journl:ej36-4-berglan is not listed on IDEAS
    2. repec:aen:journl:1995v16-03-a02 is not listed on IDEAS
    3. Hipòlit Torró, 2007. "Forecasting Weekly Electricity Prices at Nord Pool," Working Papers 2007.88, Fondazione Eni Enrico Mattei.
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    Cited by:

    1. Jorge S'anchez Canales & Alice Lixuan Xu & Chiara Fusar Bassini & Lynn H. Kaack & Lion Hirth, 2025. "An empirical estimate of the electricity supply curve from market outcomes," Papers 2511.23068, arXiv.org.
    2. Hassanzadeh Moghimi, Farzad & Boomsma, Trine K. & Siddiqui, Afzal S., 2024. "Transmission planning in an imperfectly competitive power sector with environmental externalities," Energy Economics, Elsevier, vol. 134(C).
    3. De Blauwe, Jilles & Zhang, Xiaobing & Keles, Dogan, 2025. "Investigating empirical bidding curves in the electricity spot market: Expected patterns vs anomalies?," Energy Economics, Elsevier, vol. 152(C).

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