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Competition and Prices on the Emerging Nordic Electricity Market

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  • Amundsen, Eirik S.

    (Department of Economics)

  • Bergman, Lars

    (Dept. of Economics, Stockholm School of Economics)

  • Andersson, Bo

    (Dept. of Economics, Stockholm School of Economics)

Abstract

The purpose of this paper is to quantitatively evaluate the impact on electricity prices of deregulation and free trade in the Nordic countries. The analysis is focused on the impact of increased competition on market power and the degree of monopolistic pricing. The major tool for our analysis of electricity trade and prices is a numerical multicountry electricity market model in which losses and bottlenecks in the transmission system are taken into account. Moreover both Cournot and perfect competition equilibria with and without free trade in electricity can be simulated. According to the simulation results there are significant differences between the Cournot and perfect competition equilibrium prices under autarky. When inter-country trade is allowed, however, the Cournot equilibrium prices are quite close to the equilibrium prices under perfect competition. Yet the net inter-country physical flows of electricity are small and well within existing transmission capacities.

Suggested Citation

  • Amundsen, Eirik S. & Bergman, Lars & Andersson, Bo, 1998. "Competition and Prices on the Emerging Nordic Electricity Market," SSE/EFI Working Paper Series in Economics and Finance 217, Stockholm School of Economics.
    • Handle: RePEc:hhs:hastef:0217
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    References listed on IDEAS

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    1. Brander, James & Krugman, Paul, 1983. "A 'reciprocal dumping' model of international trade," Journal of International Economics, Elsevier, vol. 15(3-4), pages 313-321, November.
    2. Bergman, Lars & Andersson, Bo, 1995. "Market Structure and the Price of Electricity: An ex ante Analysis of the deregulated Swedish Electricity Market," SSE/EFI Working Paper Series in Economics and Finance 47, Stockholm School of Economics.
    3. Bo Andersson & Lars Bergman, 1995. "Market Structure and the Price of Electricity: An Ex Ante Analysis of the Deregulated Swedish Electricity Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 97-110.
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    Cited by:

    1. Hooper, Elizabeth & Medvedev, Andrei, 2009. "Electrifying integration: Electricity production and the South East Europe regional energy market," Utilities Policy, Elsevier, vol. 17(1), pages 24-33, March.
    2. Kopsakangas-Savolainen, Maria, 2004. "The welfare effects of different pricing schemes for electricity distribution in Finland," Energy Policy, Elsevier, vol. 32(12), pages 1429-1435, August.
    3. Nepal, Rabindra & Jamasb, Tooraj, 2012. "Interconnections and market integration in the Irish Single Electricity Market," Energy Policy, Elsevier, vol. 51(C), pages 425-434.
    4. Hjalmarsson, Erik, 2000. "Nord Pool: A Power Market Without Market Power," Working Papers in Economics 28, University of Gothenburg, Department of Economics.
    5. Lundgren, Jens & Hellström, Jörgen & Rudholm, Niklas, 2008. "Multinational Electricity Market Integration and Electricity Price Dynamics," HUI Working Papers 16, HUI Research.

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    More about this item

    Keywords

    Oligopoly; deregulation; electricity; trade;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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