IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-03984527.html

Real Asset Valuation under Imperfect Competition: Can We Forget About Market Fundamentals?

Author

Listed:
  • Corinne Chaton

    (EDF R&D SEQUOIA - EDF R&D - EDF R&D - EDF [E.D.F.] - EDF – Électricité de France)

  • Laure Durand-Viel

Abstract

Real assets are usually valued by computing the stream of profits they can bring to a price‐taking firm in a liquid market. This method ignores market fundamentals by assuming that all the relevant information is included in the spot price. Our article analyses the bias resulting from such an approach when the market is imperfectly competitive. We propose a stylised two‐period model of the natural gas market with no uncertainty, focusing on strategic interactions between two types of oligopolistic players—pure traders and suppliers with downstream customers—who have access to storage. We show that the true value of storage capacity is not the same for traders and for suppliers. Comparing the latter value with the traditional price‐taking valuation reveals a systematic bias that tends to induce underinvestment.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Corinne Chaton & Laure Durand-Viel, 2013. "Real Asset Valuation under Imperfect Competition: Can We Forget About Market Fundamentals?," Post-Print hal-03984527, HAL.
    • Handle: RePEc:hal:journl:hal-03984527
    DOI: 10.1111/jems.12005
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a
    for a similarly titled item that would be available.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. is not listed on IDEAS
    2. Robert A. Ritz, 2013. "Price discrimination and limits to arbitrage in global LNG markets," Working Papers EPRG 1317, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    3. James Cruise & Lisa Flatley & Richard Gibbens & Stan Zachary, 2019. "Control of Energy Storage with Market Impact: Lagrangian Approach and Horizons," Operations Research, INFORMS, vol. 67(1), pages 1-9, January.
    4. Ritz, Robert A., 2014. "Price discrimination and limits to arbitrage: An analysis of global LNG markets," Energy Economics, Elsevier, vol. 45(C), pages 324-332.
    5. Secomandi, Nicola & Seppi, Duane J., 2014. "Real Options and Merchant Operations of Energy and Other Commodities," Foundations and Trends(R) in Technology, Information and Operations Management, now publishers, vol. 6(3-4), pages 161-331, July.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-03984527. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.