How to Determine whether Regional Markets are Integrated? Theory and Evidence from European Electricity Markets
Prices may di er between regional markets if transport capacities are limited. We develop a new approach to determine to which extent such di erences stem from limited participation in cross-border trader rather than from bottlenecks. We derive a theoretical integration benchmark for the typical case where transportation markets clear before the product markets, using Grossman's (1976) notion of a rational expectations equilibrium. We compare the benchmark to data from European electricity markets. The data reject the integration hypothesis: Capacity prices contain too little information about spot price di erential; this indicates that well informed traders do not engage in cross-border trade.
|Date of creation:||Apr 2008|
|Date of revision:|
|Contact details of provider:|| Postal: Geschwister-Scholl-Platz 1, D-80539 Munich, Germany|
Web page: http://www.sfbtr15.de/
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.:
- Neuhoff, K., 2003. "Integrating Transmission and Energy Markets Mitigates Market Power," Cambridge Working Papers in Economics 0310, Faculty of Economics, University of Cambridge.
- Robert J. Shiller, 1980.
"The Use of Volatility Measures in Assessing Market Efficiency,"
NBER Working Papers
0565, National Bureau of Economic Research, Inc.
- Shiller, Robert J, 1981. "The Use of Volatility Measures in Assessing Market Efficiency," Journal of Finance, American Finance Association, vol. 36(2), pages 291-304, May.
- Benjamin F. Hobbs & Fieke A.M. Rijkers & Maroeska G. Boots, 2005.
"The More Cooperation, The More Competition? A Cournot Analysis of the Benefits of Electric Market Coupling,"
The Energy Journal,
International Association for Energy Economics, vol. 0(Number 4), pages 69-98.
- Hobbs, B.F. & Rijkers, F.A.M., 2005. "The More Cooperation, the More Competition? A Cournot Analysis of the Benefits of Electric Market Coupling," Cambridge Working Papers in Economics 0509, Faculty of Economics, University of Cambridge.
- Hellwig, Martin F., 1980. "On the aggregation of information in competitive markets," Journal of Economic Theory, Elsevier, vol. 22(3), pages 477-498, June.
- Claude Crampes & Jean-Jaques Laffont, 2001. "Transport Pricing in the Electricity Industry," Oxford Review of Economic Policy, Oxford University Press, vol. 17(3), pages 313-328.
- Cochrane, John H., 1991.
"Volatility tests and efficient markets : A review essay,"
Journal of Monetary Economics,
Elsevier, vol. 27(3), pages 463-485, June.
- John H. Cochrane, 1991. "Volatility Tests and Efficient Markets: A Review Essay," NBER Working Papers 3591, National Bureau of Economic Research, Inc.
- Turvey, Ralph, 2006. "Interconnector economics," Energy Policy, Elsevier, vol. 34(13), pages 1457-1472, September.
- Zachmann, Georg, 2008. "Electricity wholesale market prices in Europe: Convergence?," Energy Economics, Elsevier, vol. 30(4), pages 1659-1671, July.
When requesting a correction, please mention this item's handle: RePEc:trf:wpaper:236. 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: (Tamilla Benkelberg)
If references are entirely missing, you can add them using this form.