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Market Efficiency, Competition, and Communication in Electric Power Markets: Experimental Results


  • Chapman, Duane
  • Vossler, Christian A.
  • Mount, Timothy D.
  • Barboni, V.
  • Thomas, Robert J.
  • Zimmerman, Ray D.


Economic theory gives no clear indication of the minimum number of producers necessary for a market to define competitive price-quantity equilibria which approximate price equal to marginal cost. Previous work and FERC Guidelines generally suggest that 6 to 10 generators may be workably competitive. Our experiments with PowerWeb suggest that a higher number of suppliers may be necessary to approximate competitive market solutions, this in the absence of any communication among producers. As communications rules are altered to parallel differing types of antitrust enforcement, market results with 24 participants approach pure monopoly values.

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  • Chapman, Duane & Vossler, Christian A. & Mount, Timothy D. & Barboni, V. & Thomas, Robert J. & Zimmerman, Ray D., 2002. "Market Efficiency, Competition, and Communication in Electric Power Markets: Experimental Results," Working Papers 127315, Cornell University, Department of Applied Economics and Management.
  • Handle: RePEc:ags:cudawp:127315

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    References listed on IDEAS

    1. Kogut, Bruce & Chang, Sea Jin, 1991. "Technological Capabilities and Japanese Foreign Direct Investment in the United States," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 401-413, August.
    2. Gomes-Casseres, Benjamin, 1989. "Ownership structures of foreign subsidiaries : Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 11(1), pages 1-25, January.
    3. Jean-Fran├žois Hennart, 1991. "The Transaction Costs Theory of Joint Ventures: An Empirical Study of Japanese Subsidiaries in the United States," Management Science, INFORMS, vol. 37(4), pages 483-497, April.
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    Cited by:

    1. Christian Vossler & Timothy Mount & Robert Thomas & Ray Zimmerman, 2009. "An experimental investigation of soft price caps in uniform price auction markets for wholesale electricity," Journal of Regulatory Economics, Springer, vol. 36(1), pages 44-59, August.


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