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Strategic Behavior and Collusion: An Application to the Spanish Electricity Market

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  • Ciarreta Antuñano, Aitor
  • Gutiérrez Hita, Carlos

Abstract

The paper has two major contributions to the theory of repeated games. First, we build a supergame oligopoly model where firms compete in supply functions, we show how collusion sustainability is affected by the presence of a convex cost function, the magnitude of both the slope of demand market, and the number of rivals. Then, we compare the results with those of the traditional Cournot reversion under the same structural characteristics. We find how depending on the number of firms and the slope of the linear demand, collusion sustainability is easier under supply function than under Cournot competition. The conclusions of the models are simulated with data from the Spanish wholesale electricity market to predict lower bounds of the discount factors.

Suggested Citation

  • Ciarreta Antuñano, Aitor & Gutiérrez Hita, Carlos, 2005. "Strategic Behavior and Collusion: An Application to the Spanish Electricity Market," DFAEII Working Papers 1988-088X, University of the Basque Country - Department of Foundations of Economic Analysis II.
    • Handle: RePEc:ehu:dfaeii:6748
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    References listed on IDEAS

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    1. David Collie, 2004. "Collusion and the elasticity of demand," Economics Bulletin, AccessEcon, vol. 12(3), pages 1-6.
    2. repec:bla:jindec:v:47:y:1999:i:1:p:107-24 is not listed on IDEAS
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    Cited by:

    1. Eva Jansson, 0. "Deregulation, property rights, and legal system," European Journal of Law and Economics, Springer, vol. 0, pages 1-25.

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