Uniform Price Market and Behaviour Pattern: What Does the Iberian Electricity Market Point Out?
The electricity spot markets can be considered as capacity constrained markets (Kreps and Scheinkman, 1983), where market price definition depends on the quantity strategies. In this theoretical framework, the main target of the present paper is to show to what extent a spot market organized like a Uniform Price Auction (UPA) is naturally inclined to develop anti-competitive practices, in particular through quantity strategies. To achieve this objective, multivariable models are defined for each daily demand period of the Iberian electricity market. Each model correlates the hourly market price change and the bid quantities of the two main Iberian producers (Endesa and Iberdrola), for every summer between 2001 and 2004. To apply those models one has to solve the endogeneity problem. This exercise is also useful to highlight any anti-competitive behaviour. Quantities produced by the producers with infra marginal bids should not be endogenous when there is no risk that they will not be dispatched, unless producers have some expectations about the system marginal price. In addition, this kind of endogeneity reinforces the model’s theoretical assumption that change in the system marginal price stems from quantity strategies. The models present some expectable but interesting results. Those results show that even base load units’ bids may depend on expectations about the system marginal price evolution. Those expectations can reflect market strategies. Therefore, in a market where the main companies own base load and peak load units, like the Iberian wholesale electricity market, the UPA is an open window to anti-competitive practices based on quantity strategies, such as the raising of the system marginal price through the capacity withdrawal from base load units.
|Date of creation:||Dec 2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: + 351 239 790 500
Fax: +351 239 403511
Web page: http://www.uc.pt/en/feuc/gemf/
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.:
- Holmberg, Pär, 2005. "Comparing Supply Function Equilibria of Pay-as-Bid and Uniform-Price Auctions," Working Paper Series 2005:17, Uppsala University, Department of Economics.
- Von der Fehr, N.H.M. & Harbord, D., 1992.
"Spot Market Competition in the UK Electricity Industry,"
09/1992, Oslo University, Department of Economics.
- von der Fehr, Nils-Henrik Morch & Harbord, David, 1993. "Spot Market Competition in the UK Electricity Industry," Economic Journal, Royal Economic Society, vol. 103(418), pages 531-46, May.
- Klemperer, Paul D & Meyer, Margaret A, 1989. "Supply Function Equilibria in Oligopoly under Uncertainty," Econometrica, Econometric Society, vol. 57(6), pages 1243-77, November.
- Aitor Ciarreta & María Espinosa, 2010.
"Market power in the Spanish electricity auction,"
Journal of Regulatory Economics,
Springer, vol. 37(1), pages 42-69, February.
- Espinosa Alejos, María Paz & Ciarreta Antuñano, Aitor, 2005. "Market Power in the Spanish Electricity Auction," DFAEII Working Papers 2005-04, University of the Basque Country - Department of Foundations of Economic Analysis II.
- Aitor Ciarreta & María Paz Espinosa, 2003. "Market Power In The Spanish Wholesale Electricity Market," Working Papers. Serie AD 2003-22, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- Natalia Fabra & Juan Toro, 2001.
"Price Wars and Collusion in the Spanish Electricity Market,"
Economic Working Papers at Centro de Estudios Andaluces
E2001/05, Centro de Estudios Andaluces.
- Fabra, Natalia & Toro, Juan, 2005. "Price wars and collusion in the Spanish electricity market," International Journal of Industrial Organization, Elsevier, vol. 23(3-4), pages 155-181, April.
- Juan Toro & Natalia Fabra, 2002. "Price Wars and Collusion in the Spanish Electricity Market," Economics Series Working Papers 136, University of Oxford, Department of Economics.
- Natalia Fabra & Juan Toro, 2002. "Price Wars and Collusion in the Spanish Electricity Market," Industrial Organization 0212001, EconWPA, revised 31 Aug 2003.
- Claude Crampes and Natalia Fabra, 2005.
"The Spanish Electricity Industry: Plus ca change,"
The Energy Journal,
International Association for Energy Economics, vol. 0(Special I), pages 127-154.
- Crampes, Claude & Fabra, Natalia, 2004. "The Spanish Electricity Industry: Plus ça change..," IDEI Working Papers 317, Institut d'Économie Industrielle (IDEI), Toulouse.
- Green, Edward J & Porter, Robert H, 1984.
"Noncooperative Collusion under Imperfect Price Information,"
Econometric Society, vol. 52(1), pages 87-100, January.
- Edward J Green & Robert H Porter, 1997. "Noncooperative Collusion Under Imperfect Price Information," Levine's Working Paper Archive 1147, David K. Levine.
- Green, Edward J. & Porter, Robert H., 1982. "Noncooperative Collusion Under Imperfect Price Information," Working Papers 367, California Institute of Technology, Division of the Humanities and Social Sciences.
- Baldick, Ross & Baughman, Martin L., 2003. "An Oligopoly Simulation of a Restructured ERCOT: Will Future Prices Be Competitive?," The Electricity Journal, Elsevier, vol. 16(3), pages 59-71, April.
- Mark Armstrong & Simon Cowan & John Vickers, 1994. "Regulatory Reform: Economic Analysis and British Experience," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510790, June.
- Green, Richard J & Newbery, David M, 1992.
"Competition in the British Electricity Spot Market,"
Journal of Political Economy,
University of Chicago Press, vol. 100(5), pages 929-53, October.
- Green, Richard & Newbery, David M G, 1991. "Competition in the British Electricity Spot Market," CEPR Discussion Papers 557, C.E.P.R. Discussion Papers.
- Cabral, Luis M. B., 1995. "Conjectural variations as a reduced form," Economics Letters, Elsevier, vol. 49(4), pages 397-402, October.
- Crampes , C. & Fabra , N., 2005. "The Spanish Electricity Industry: Plus ça change …," Cambridge Working Papers in Economics 0502, Faculty of Economics, University of Cambridge.
- Federico, Giulio & Rahman, David, 2003.
"Bidding in an Electricity Pay-as-Bid Auction,"
Journal of Regulatory Economics,
Springer, vol. 24(2), pages 175-211, September.
- Giulio Federico & David Rahman, 2000. "Bidding in an electricity pay-as-bid auction," Economics Papers 2001-W5, Economics Group, Nuffield College, University of Oxford, revised 01 Apr 2001.
- Giulio Federico & David Rahman, 2001. "Bidding in an Electricity Pay-as-Bid Auction," Economics Series Working Papers 2001-W05, University of Oxford, Department of Economics.
- Alfred E. Kahn & Peter Cramton & Robert H. Porter & Richard D. Tabors, 2001.
"Uniform Pricing or Pay-as-Bid Pricing: A Dilemma for California and Beyond,"
Papers of Peter Cramton
01ej, University of Maryland, Department of Economics - Peter Cramton, revised 27 Jan 2001.
- Kahn, Alfred E. & Cramton, Peter C. & Porter, Robert H. & Tabors, Richard D., 2001. "Uniform Pricing or Pay-as-Bid Pricing: A Dilemma for California and Beyond," The Electricity Journal, Elsevier, vol. 14(6), pages 70-79, July.
When requesting a correction, please mention this item's handle: RePEc:gmf:wpaper:2008-08. 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: (Sara Santos)
If references are entirely missing, you can add them using this form.