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

Author

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  • García-Díaz, Antón
  • Marín Uribe, Pedro Luis

Abstract

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.

Suggested Citation

  • García-Díaz, Antón & Marín Uribe, Pedro Luis, 2000. "Strategic Bidding in Electricity Pools with Short-Lived Bids: An Application to the Spanish Market," CEPR Discussion Papers 2567, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:2567
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    Citations

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    Cited by:

    1. Natalia Fabra & Nils‐Henrik Fehr & David Harbord, 2006. "Designing electricity auctions," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 23-46, March.
    2. Aitor Ciarreta & María Espinosa, 2010. "Market power in the Spanish electricity auction," Journal of Regulatory Economics, Springer, vol. 37(1), pages 42-69, February.
    3. Rajnish Kamat & Shmuel Oren, 2004. "Two-settlement Systems for Electricity Markets under Network Uncertainty and Market Power," Journal of Regulatory Economics, Springer, vol. 25(1), pages 5-37, January.

    More about this item

    Keywords

    Bids; Electricity Pools; Market Power;

    JEL classification:

    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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