Estimating Marginal Costs and Market Power in the Italian Electricity Auctions
In this paper we examine the bidding behaviour of firm competing in the Italian wholesale electricity market where generators submit hourly supply schedule to sell power. We describe the institutional characteristics of the Italian market and derive generators' equilibrium bidding functions. We also discuss the main empirical strategies followed by the recent econometrical literature to obtain estimates of (unobservable) optimal bids. Then, we use individual bid data, quantity volumes and other control variables to compare actual bidding behaviour to theoretical benchmarks of profit maximization. We obtain estimates of generators' costs to be used in conjunction with hourly market equilibrium prices to derive some measures of the extent of market power in the Italian electricity sector and of its exploitation by firms.
|Date of creation:||Feb 2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.statistica.unimib.it
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Von der Fehr, N.H.M. & Harbord, D., 1992.
"Spot Market Competition in the UK Electricity Industry,"
09/1992, Oslo University, Department of Economics.
- von der Fehr, Nils-Henrik Morch & Harbord, David, 1993. "Spot Market Competition in the UK Electricity Industry," Economic Journal, Royal Economic Society, vol. 103(418), pages 531-46, May.
- Susan Athey & Philip A. Haile, 2006.
"Empirical Models of Auctions,"
Cowles Foundation Discussion Papers
1562, Cowles Foundation for Research in Economics, Yale University.
- Crawford, Gregory S. & Crespo, Joseph & Tauchen, Helen, 2007. "Bidding asymmetries in multi-unit auctions: Implications of bid function equilibria in the British spot market for electricity," International Journal of Industrial Organization, Elsevier, vol. 25(6), pages 1233-1268, December.
- Kai-Uwe Kühn & Matilde Machado, 2004.
"Bilateral Market Power And Vertical Integration In The Spanish Electricity Spot Market,"
- Kühn, Kai-Uwe & Machado, Matilde Pinto, 2004. "Bilateral Market Power and Vertical Integration in the Spanish Electricity Spot Market," CEPR Discussion Papers 4590, C.E.P.R. Discussion Papers.
- Parisio, Lucia & Bosco, Bruno, 2008.
"Electricity prices and cross-border trade: Volume and strategy effects,"
Elsevier, vol. 30(4), pages 1760-1775, July.
- Parisio, Lucia & Bosco, Bruno, 2006. "Electricity prices and cross-border trade: volume and strategy effects," MPRA Paper 473, University Library of Munich, Germany.
- Wilson, Robert, 1979. "Auctions of Shares," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 675-89, November.
- Emmanuel Guerre & Isabelle Perrigne & Quang Vuong, 2000. "Optimal Nonparametric Estimation of First-Price Auctions," Econometrica, Econometric Society, vol. 68(3), pages 525-574, May.
- Lawrence M. Ausubel & Peter Cramton, 1995. "Demand Reduction and Inefficiency in Multi-Unit Auctions," Papers of Peter Cramton 98wpdr, University of Maryland, Department of Economics - Peter Cramton, revised 22 Jul 2002.
- Bruno Bosco & Lucia Parisio & Matteo Pelagatti & Fabio Baldi, 2010. "Long-run relations in european electricity prices," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(5), pages 805-832.
- Parisio, Lucia & Bosco, Bruno, 2003. "Market Power and the Power Market: Multi-unit Bidding and (In)Efficiency in Electricity Auctions," International Tax and Public Finance, Springer, vol. 10(4), pages 377-401, August.
- Catherine D. Wolfram, 1999. "Measuring Duopoly Power in the British Electricity Spot Market," American Economic Review, American Economic Association, vol. 89(4), pages 805-826, September.
When requesting a correction, please mention this item's handle: RePEc:mis:wpaper:20100201. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Matteo Pelagatti)
If references are entirely missing, you can add them using this form.