Competition with Forward Contracts: A Laboratory Analysis Motivated by Electricity Market Design
We use experiments to study the efficiency effects for a market as a whole of adding the possibility of forward contracting to a pre-existing spot market. We deal separately with the cases where spot market competition is in quantities and where it is in supply functions. In both cases we compare the effect of adding a contract market with the introduction of an additional competitor, changing the market structure from a triopoly to a quadropoly. We find that, as theory suggests, for both types of competition the introduction of a forward market significantly lowers prices. The combination of supply function competition with a forward market leads to high efficiency levels.
|Date of creation:||17 Jul 2003|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 34 93 592 1203
Fax: +34 93 542-1223
Web page: http://pareto.uab.cat
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bolle, Friedel, 2001. "Competition with supply and demand functions," Energy Economics, Elsevier, vol. 23(3), pages 253-277, May.
- Hoffman, Elizabeth & Plott, Charles R., .
"The Effect of Intertemporal Speculation on the Outcomes in Seller Posted Offer Auction Markets,"
241, California Institute of Technology, Division of the Humanities and Social Sciences.
- Hoffman, Elizabeth & Plott, Charles R, 1981. "The Effect of Intertemporal Speculation on the Outcomes in Seller Posted Offer Auction Markets," The Quarterly Journal of Economics, MIT Press, vol. 96(2), pages 223-41, May.
- Green, Richard J & Newbery, David M, 1992.
"Competition in the British Electricity Spot Market,"
Journal of Political Economy,
University of Chicago Press, vol. 100(5), pages 929-53, October.
- Green, Richard & Newbery, David M G, 1991. "Competition in the British Electricity Spot Market," CEPR Discussion Papers 557, C.E.P.R. Discussion Papers.
- Steffen Huck & Hans-Theo Normann & Joerg Oechssler, 1997.
"Learning in Cournot Oligopoly - An Experiment,"
Game Theory and Information
9707009, EconWPA, revised 22 Jul 1997.
- Le Coq, Chloe & Orzen, Henrik, 2006.
"Do forward markets enhance competition?: Experimental evidence,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 61(3), pages 415-431, November.
- Le Coq, Chloé & Orzen, Henrik, 2002. "Do Forward Markets Enhance Competition? Experimental Evidence," SSE/EFI Working Paper Series in Economics and Finance 506, Stockholm School of Economics, revised 01 Oct 2004.
- Newbery, David M., 2002. "Problems of liberalising the electricity industry," European Economic Review, Elsevier, vol. 46(4-5), pages 919-927, May.
- Rassenti, Stephen J & Smith, Vernon L & Wilson, Bart J, 2003. "Discriminatory Price Auctions in Electricity Markets: Low Volatility at the Expense of High Price Levels," Journal of Regulatory Economics, Springer, vol. 23(2), pages 109-23, March.
- Miller, Ross M & Plott, Charles R & Smith, Vernon L, 1977.
"Intertemporal Competitive Equilibrium: An Empirical Study of Speculation,"
The Quarterly Journal of Economics,
MIT Press, vol. 91(4), pages 599-624, November.
- Miller, R. M. & Plott, Charles R. & Smith, Vernon L., . "Intertemporal Competitive Equilibrium: An Empirical Study of Speculation," Working Papers 87, California Institute of Technology, Division of the Humanities and Social Sciences.
- Klaus Abbink & Jordi Brandts & Tanga McDaniel, 2002.
"Asymmetric demand information in uniform and discriminatory call auctions: an experimental analysis motivated by electricity markets,"
UFAE and IAE Working Papers
520.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Abbink, Klaus & Brandts, Jordi & McDaniel, Tanga, 2003. "Asymmetric Demand Information in Uniform and Discriminatory Call Auctions: An Experimental Analysis Motivated by Electricity Markets," Journal of Regulatory Economics, Springer, vol. 23(2), pages 125-44, March.
- Allaz Blaise & Vila Jean-Luc, 1993. "Cournot Competition, Forward Markets and Efficiency," Journal of Economic Theory, Elsevier, vol. 59(1), pages 1-16, February.
- Klemperer, Paul D & Meyer, Margaret A, 1989. "Supply Function Equilibria in Oligopoly under Uncertainty," Econometrica, Econometric Society, vol. 57(6), pages 1243-77, November.
- Rassenti, Stephen & Reynolds, Stanley S. & Smith, Vernon L. & Szidarovszky, Ferenc, 2000. "Adaptation and convergence of behavior in repeated experimental Cournot games," Journal of Economic Behavior & Organization, Elsevier, vol. 41(2), pages 117-146, February.
When requesting a correction, please mention this item's handle: RePEc:aub:autbar:581.03. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Xavier Vila)
If references are entirely missing, you can add them using this form.