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Horizontal subcontracting and intermittent power generation

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  • BOUCKAERT, Jan
  • VAN MOER, Geert

Abstract

Intermittent power sources enable firms to reduce costs by horizontally subcontracting generation. Dispatchable units serve as a strategic device, even when never used, since their availability credibly limits the price paid for subcontracting. Security of supply measures motivated by too low plant profitability therefore underestimate firms’ unilateral incentive to install dispatchable units.

Suggested Citation

  • BOUCKAERT, Jan & VAN MOER, Geert, 2014. "Horizontal subcontracting and intermittent power generation," Working Papers 2014031, University of Antwerp, Faculty of Business and Economics.
    • Handle: RePEc:ant:wpaper:2014031
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    File URL: https://repository.uantwerpen.be/docman/irua/289d46/296c00c0.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Subcontracting; Intermittency; Security of supply; Dispatchable units;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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