We study alternative market power mitigation measures in a model where a dominant producer faces a competitive fringe with the same cost structure. We characterise the asset divestment by the dominant firm which achieves the greatest reduction in prices. This divestment entails the sale of marginal assets whose cost range encompasses the post-divestment price. A divestment of this type can be several times more effective in reducing prices than divestments of baseload (or low-cost) assets. We also establish that financial contracts (modeled as Virtual Power Plant schemes) are at best equivalent to baseload divestments in terms of consumer welfare.
|Date of creation:||01 Aug 2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.iese.edu/
More information through EDIRC
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.:
- Richard Gilbert & David Newbery, 2008. "Analytical Screens for Electricity Mergers," Review of Industrial Organization, Springer, vol. 32(3), pages 217-239, May.
- Christian Schultz, 2005. "Virtual Capacity and Competition," CESifo Working Paper Series 1487, CESifo Group Munich.
- Bert Willems, 2004. "Cournot Competition, Financial Option markets and Efficiency," Center for Economic Studies - Discussion papers ces0414, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
- James Bushnell, 2007.
"Oligopoly equilibria in electricity contract markets,"
Journal of Regulatory Economics,
Springer, vol. 32(3), pages 225-245, December.
- Bushnell, James, 2007. "Oligopoly Equilibria in Electricity Contract Markets," Staff General Research Papers 13135, Iowa State University, Department of Economics.
- Green, Richard, 1999. "The Electricity Contract Market in England and Wales," Journal of Industrial Economics, Wiley Blackwell, vol. 47(1), pages 107-24, March.
- de Frutos, Maria-Angeles & Fabra, Natalia, 2008. "On the Impact of Forward Contract Obligations in Multi-Unit Auctions," CEPR Discussion Papers 6756, C.E.P.R. Discussion Papers.
- Allaz Blaise & Vila Jean-Luc, 1993. "Cournot Competition, Forward Markets and Efficiency," Journal of Economic Theory, Elsevier, vol. 59(1), pages 1-16, February.
When requesting a correction, please mention this item's handle: RePEc:ebg:iesewp:d-0812. 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: (Noelia Romero)
If references are entirely missing, you can add them using this form.