Competition with Forward Contracts: A Laboratory Analysis Motivated by Electricity Market Design
We use experiments to study the efficiency effects of adding the possibility of forward contracting to a spot market. We focus on the strategic implications of a forward market and consider both quantity and supply function competition. In both cases we compare the effect of adding a contract market to the introduction of an additional competitor. 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. Copyright 2008 The Author(s). Journal compilation Royal Economic Society 2008.
(This abstract was borrowed from another version of this item.)
References listed on IDEAS
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.:
- Allaz Blaise & Vila Jean-Luc, 1993. "Cournot Competition, Forward Markets and Efficiency," Journal of Economic Theory, Elsevier, vol. 59(1), pages 1-16, February.
- Miller, R. M. & Plott, Charles R. & Smith, Vernon L., .
"Intertemporal Competitive Equilibrium: An Empirical Study of Speculation,"
87, California Institute of Technology, Division of the Humanities and Social Sciences.
- Ross M. Miller & Charles R. Plott & Vernon L. Smith, 1977. "Intertemporal Competitive Equilibrium: An Empirical Study of Speculation," The Quarterly Journal of Economics, Oxford University Press, vol. 91(4), pages 599-624.
- 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.
- Bolle, Friedel, 2001. "Competition with supply and demand functions," Energy Economics, Elsevier, vol. 23(3), pages 253-277, May.
- 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.
- 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).
- 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.
- 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.
- Elizabeth Hoffman & Charles R. Plott, 1981. "The Effect of Intertemporal Speculation on the Outcomes in Seller Posted Offer Auction Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 96(2), pages 223-241.
- 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.
- Steffen Huck & Hans-Theo Normann & Joerg Oechssler, 1997.
"Learning in Cournot Oligopoly - An Experiment,"
Game Theory and Information
9707009, EconWPA, revised 22 Jul 1997.
- Newbery, David M., 2002. "Problems of liberalising the electricity industry," European Economic Review, Elsevier, vol. 46(4-5), pages 919-927, May.
When requesting a correction, please mention this item's handle: RePEc:cla:levrem:666156000000000172. 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: (David K. Levine)
If references are entirely missing, you can add them using this form.