Access to Commitment Devices Reduces Investment Incentives in Oligopoly
In this paper we analyze incentives to invest in capacity prior to a sequence of Cournot spot markets with varying demand. We compare equilibrium investment in the absence and in presence of the possibility to trade on forward markets. We find that the access to strategic devices (such as forward contracts as analyzed by Allaz and Vila (1993), or, equivalently strategic delegation as analyzed by Fershtman and Judd (1987) or Vickers (1985)) prior to spot market competition reduces equilibrium investments.
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| Date of creation: | 06 Jun 2006 |
| Date of revision: | |
| Handle: | RePEc:kls:series:0025 |
| Contact details of provider: | Postal: Phone: 0221 / 470 5607 Fax: 0221 / 470 5179 Web page: http://www.wiso.uni-koeln.deEmail: More information through EDIRC
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References listed on IDEAS
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- Mahenc, P. & Salanie, F., 2004. "Softening competition through forward trading," Journal of Economic Theory, Elsevier, vol. 116(2), pages 282-293, June.
- David M. Newbery, 1998.
"Competition, Contracts, and Entry in the Electricity Spot Market,"
RAND Journal of Economics,
The RAND Corporation, vol. 29(4), pages 726-749, Winter.
- Newbery, D. M., 1997. "Competition, Contracts and Entry in the Electricity Spot Market," Cambridge Working Papers in Economics 9707, Faculty of Economics, University of Cambridge.
- Jean J. Gabszewicz & Sougata Poddar, 1997.
"Demand fluctuations and capacity utilization under duopoly,"
Economic Theory,
Springer, vol. 10(1), pages 131-146.
- Gabszewicz, J.J. & Poddar, S., . "Demand fluctuations and capacity utilization under duopoly," CORE Discussion Papers RP -1269, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- GABSZEWICZ, Jean J. & PODDAR , Sougata, 1995. "Demand Fluctuations and Capacity Utilization under Duopoly," CORE Discussion Papers 1995051, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Peter Cramton & Steven Stoft, 2005.
"A Capacity Market that Makes Sense,"
Papers of Peter Cramton
05licap, University of Maryland, Department of Economics - Peter Cramton, revised 2005.
- Cramton, Peter & Stoft, Steven, 2005. "A Capacity Market that Makes Sense," The Electricity Journal, Elsevier, vol. 18(7), pages 43-54.
- Bushnell, James, 2005. "Electricity Resource Adequacy: Matching Policies and Goals," The Electricity Journal, Elsevier, vol. 18(8), pages 11-21, October.
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