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Market Power in the England and Wales Wholesale Electricity Market 1995-2000

  • Sweeting, A.

This paper shows that generators exercised increasing market power in the England and Wales wholesale electricity market in the second half of the 1990s despite declining market concentration. It examines whether this was consistent with static, non-cooperative oligopoly models, which are widely used to model electricity markets, by testing the static Nash equilibrium assumption that each generator chose its bids to maximise its current profits taking the bids of other generators as given. It finds a significant change in behaviour in late 1996. In 1995 and 1996 generator behaviour was consistent with the static Nash equilibrium assumption if the majority of their output was covered by financial contracts which hedged prices. After 1996 their behaviour was inconsistent with the static Nash equilibrium assumption given their contract cover but it was consistent with tacit collusion.

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File URL: http://www.econ.cam.ac.uk/electricity/publications/wp/ep55.pdf
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Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0455.

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Length: 44
Date of creation: Oct 2004
Date of revision:
Handle: RePEc:cam:camdae:0455
Note: CMI,IO
Contact details of provider: Web page: http://www.econ.cam.ac.uk/index.htm

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  1. 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.
  2. Richard Green, 2004. "Did English Generators Play Cournot? Capacity withholding in the Electricity Pool," Working Papers 0410, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  3. Rafael Macatangay, 2002. "Tacit Collusion in the Frequently Repeated Multi-Unit Uniform Price Auction for Wholesale Electricity in England and Wales," European Journal of Law and Economics, Springer, vol. 13(3), pages 257-273, May.
  4. Natalia Fabra & Juan Toro, 2003. "The Fall in British Electricity Prices: Market Rules, Market Structure, or Both?," Industrial Organization 0309001, EconWPA.
  5. Severin Borenstein & James B. Bushnell & Frank A. Wolak, 2002. "Measuring Market Inefficiencies in California's Restructured Wholesale Electricity Market," American Economic Review, American Economic Association, vol. 92(5), pages 1376-1405, December.
  6. Von der Fehr, N.H.M. & Harbord, D., 1992. "Spot Market Competition in the UK Electricity Industry," Memorandum 09/1992, Oslo University, Department of Economics.
  7. Green, Richard J, 1996. "Increasing Competition in the British Electricity Spot Market," Journal of Industrial Economics, Wiley Blackwell, vol. 44(2), pages 205-16, June.
  8. Mark Armstrong & Simon Cowan & John Vickers, 1994. "Regulatory Reform: Economic Analysis and British Experience," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510790, June.
  9. Natalia Fabra, 2003. "Tacit Collusion in Repeated Auctions: Uniform Versus Discriminatory," Journal of Industrial Economics, Wiley Blackwell, vol. 51(3), pages 271-293, 09.
  10. Green, Richard, 1999. "The Electricity Contract Market in England and Wales," Journal of Industrial Economics, Wiley Blackwell, vol. 47(1), pages 107-24, March.
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