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Supply Function Equilibria in Networks with Transport Constraints

Author

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  • Holmberg, Pär

    (Research Institute of Industrial Economics (IFN))

  • Philpott, Andrew

    (Department of Engineering Science)

Abstract

Transport constraints limit competition and arbitrageurs possibilities of exploiting price differences between commodities in neighbouring markets. We analyze a transport-constrained network with local demand shocks, where spatially distributed oligopoly producers compete with supply functions, as in wholesale electricity markets. Uniqueness and existence results are proven, and we are able to explicitly solve for symmetric supply-function equilibria in some special cases.

Suggested Citation

  • Holmberg, Pär & Philpott, Andrew, 2012. "Supply Function Equilibria in Networks with Transport Constraints," Working Paper Series 945, Research Institute of Industrial Economics, revised 10 Aug 2015.
    • Handle: RePEc:hhs:iuiwop:0945
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    References listed on IDEAS

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    Cited by:

    1. Majid Al-Gwaiz & Xiuli Chao & Owen Q. Wu, 2017. "Understanding How Generation Flexibility and Renewable Energy Affect Power Market Competition," Manufacturing & Service Operations Management, INFORMS, vol. 19(1), pages 114-131, February.
    2. Blázquez de Paz, Mario, 2018. "Electricity auctions in the presence of transmission constraints and transmission costs," Energy Economics, Elsevier, vol. 74(C), pages 605-627.
    3. Blázquez de Paz, Mario, 2015. "Transmission Costs, Transmission Capacities and their Influence on Market Power in Wholesale Electricity Markets," Working Paper Series 1070, Research Institute of Industrial Economics, revised 16 Dec 2015.

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    More about this item

    Keywords

    Spatial competition; Multi-unit auction; Supply-function equilibrium; Transmission network; Wholesale electricity markets;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General

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