On Quantity Competition and Transmission Constraints in Electricity Market
In this paper we characterize equilibria in a quantity game where symmetric firms face a local demand together with an export-constrained demand. Firms have unlimited access to a local demand but a restricted access to a second market, like in the electricity network where generators compete to satisfy demand but competition is restricted by transmission capacity. We show the existence of an effective demand that is continuous but not differentiable due to the transmission constraint. Three types of equilibria emerge in this context, parametrized by capacity. First, a symmetric equilibrium (unique) when the access to the second market is constrained. Second, a set of continuous and asymmetric equilibria with a fully used link but not constrained; and finally, a symmetric and unique equilibrium in which the link is not fully used. We also show how multiplicity of equilibria tends to disappear as the number of competitors increase
|Date of creation:||11 Aug 2004|
|Date of revision:|
|Contact details of provider:|| Phone: 1 212 998 3820|
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.asp
More information through EDIRC
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.:
- Bert Willems, 2000.
"Cournot competition in the electricity market with transmission constraints,"
Energy, Transport and Environment Working Papers Series
ete0004, KU Leuven, Department of Economics - Research Group Energy, Transport and Environment.
- Bert Willems, 2000. "Cournot Competition in the Electricity Market with Transmission Constraints," Working Papers Department of Economics ces0024, KU Leuven, Faculty of Economics and Business, Department of Economics.
- Bushnell, James, 1999. "Transmission Rights and Market Power," The Electricity Journal, Elsevier, vol. 12(8), pages 77-85, October.
- SMEERS, Yves & WEI, Jing- Yuan, 1997. "Spatially oligopolistic model with opportunity cost pricing for transmission capacity reservations - A variational inequality approach," CORE Discussion Papers 1997017, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Paul Klemperer, 2000.
"Why Every Economist Should Learn Some Auction Theory,"
- Klemperer, Paul, 2000. "Why every Economist should Learn some Auction Theory," CEPR Discussion Papers 2572, C.E.P.R. Discussion Papers.
- Natalia Fabra & Nils‐Henrik Fehr & David Harbord, 2006.
"Designing electricity auctions,"
RAND Journal of Economics,
RAND Corporation, vol. 37(1), pages 23-46, 03.
- George J. Mailath, 1998.
"Do People Play Nash Equilibrium? Lessons from Evolutionary Game Theory,"
Journal of Economic Literature,
American Economic Association, vol. 36(3), pages 1347-1374, September.
- George J. Mailath, . ""Do People Play Nash Equilibrium? Lessons From Evolutionary Game Theory''," CARESS Working Papres 98-01, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
- Paul L. Joskow & Richard Schmalensee, 1988. "Markets for Power: An Analysis of Electrical Utility Deregulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262600188, March.
- Chao, Hung-Po & Peck, Stephen, 1996. "A Market Mechanism for Electric Power Transmission," Journal of Regulatory Economics, Springer, vol. 10(1), pages 25-59, July.
- Severin Borenstein & James. Bushnell & Steven Stoft, 2000.
"The Competitive Effects of Transmission Capacity in A Deregulated Electricity Industry,"
RAND Journal of Economics,
The RAND Corporation, vol. 31(2), pages 294-325, Summer.
- Severin Borenstein & James Bushnell & Steven Stoft, 1997. "The Competitive Effects of Transmission Capacity in a Deregulated Electricity Industry," NBER Working Papers 6293, National Bureau of Economic Research, Inc.
- Berenstein, Severin & Bushnell, James & Stoft, Steven, 2000. "The Competitive Effects of Transmission Capacity in a Deregulated Electricity Industry," Staff General Research Papers Archive 13145, Iowa State University, Department of Economics.
- Richard Gilbert & Neuhoff, K. & Newbery, D., 2002. "Allocating Transmission to Mitigate Market Power in Electricity Networks," Cambridge Working Papers in Economics 0225, Faculty of Economics, University of Cambridge.
When requesting a correction, please mention this item's handle: RePEc:ecm:latm04:98. 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: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.