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Oligopoly Equilibria in Electricity Contract Markets

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  • Bushnell, James

Abstract

This paper examines the implications of forward contracting on oligopoly environments by extending the model of Allaz and Vila to an environment with multi- ple firms and increasing marginal cost. Estimates of key parameters of this model are taken from existing electricity markets to predict the market impact of one round of public contracting, such as those seen in auctions for retail provision and resource pro- curement. The results imply that, when forward contracts are present, the importance of supplier concentration is greatly magnified relative to other determinants unilateral market power such as demand elasticity.

Suggested Citation

  • Bushnell, James, 2007. "Oligopoly Equilibria in Electricity Contract Markets," Staff General Research Papers Archive 13135, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:13135
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    References listed on IDEAS

    as
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    20. Bushnell, James & Wolfram, Catherine, 2008. "Electricity Markets," Staff General Research Papers Archive 31547, Iowa State University, Department of Economics.
    21. Severin Borenstein & James B. Bushnell & Frank A. Wolak, 2002. "Measuring Market Inefficiencies in California's Restructured Wholesale Electricity Market," American Economic Review, American Economic Association, vol. 92(5), pages 1376-1405, December.
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    More about this item

    Keywords

    contracts; cournot competition; competition policy; electricity markets;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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