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Strategic Bidding in Electricity Pools with Short-Lived Bids: An Application to the Spanish Market

  • García-Díaz, Antón
  • Marín Uribe, Pedro Luis
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    We generalize von der Fehr and Harbord's (1993) multi-unit auction model for the case of a deterministic demand allowing for any technology mix and elastic demand in order to account for demand side bidding. We obtain a general characterization of the equilibrium and show that the Cournot model overestimates market power in pool markets. We simulate the Spanish electricity pool and show that price-cost margins substantially increased with the 1996 merger that took the industry from a six firm structure to its current four firm structure. This is almost equivalent to a nearly symmetric duopoly. The introduction of demand-side bidding is not likely to change this situation.

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    Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2567.

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    Date of creation: Sep 2000
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    Handle: RePEc:cpr:ceprdp:2567
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