Market design in wholesale electricity markets
As European countries move towards complete unbundling in electricity markets, some issues regarding market design are still under discussion. In particular, which market configuration would give the right incentives to promote efficiency and reduce final prices. In this paper we analyze a design in which prices are binding for more than one market period (like in the former British system or in the Australian system) and we compare price equilibria and collusive incentives under proportional and efficient rationing. To do so, we build on Le Coq (2002) and Crampes and Creti (2003) framework to account for stochastic demand. Our results suggest that with stochastic demand, incentives for strategically withholding capacity are still present but incentives to agree on market share are mitigated by efficient rationing.
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- Paul L. Joskow & Edward Kohn, 2002.
"A Quantitative Analysis of Pricing Behavior in California's Wholesale Electricity Market During Summer 2000,"
The Energy Journal,
International Association for Energy Economics, vol. 0(Number 4), pages 1-35.
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- Joskow, P. & Edward Kahn, 2002. "A Quantitative Analysis of Pricing Behavior In California’s Wholesale Electricity Market During Summer 2000," Cambridge Working Papers in Economics 0211, Faculty of Economics, University of Cambridge.
- Emmanuel Dechenaux & Dan Kovenock, 2011. "Endogenous rationing, price dispersion and collusion in capacity constrained supergames," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 47(1), pages 29-74, May.
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- Crampes , C. & Fabra , N., 2005. "The Spanish Electricity Industry: Plus ça change …," Cambridge Working Papers in Economics 0502, Faculty of Economics, University of Cambridge.
- Anna Creti & Natalia Fabra, 2003. "Capacity Markets for Electricity," Industrial Organization 0309002, EconWPA, revised 26 Nov 2003.
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