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A Critique of Wolak’s Evaluation of the NZ Electricity Market: The Incentive to Exercise Market Power with Elastic Demand and Transmission Loss

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Abstract

This paper is the second in a symposium of papers that examine the 2009 report by Frank Wolak into the New Zealand electricity market. In this paper, we discuss the Report’s measures of the ability and incentives of generators to exercise unilateral market power. We show that the construction and interpretation of these measures are highly sensitive to some key assumptions, particularly those concerning the elasticity of demand for electricity in the wholesale market and the amount of transmission loss on the national grid.

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  • Seamus Hogan & Peter Jackson, 2011. "A Critique of Wolak’s Evaluation of the NZ Electricity Market: The Incentive to Exercise Market Power with Elastic Demand and Transmission Loss," Working Papers in Economics 11/09, University of Canterbury, Department of Economics and Finance.
    • Handle: RePEc:cbt:econwp:11/09
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    File URL: https://repec.canterbury.ac.nz/cbt/econwp/1109.pdf
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    1. Lewis Evans & Seamus Hogan & Peter Jackson, 2012. "A critique of Wolak's evaluation of the NZ electricity market: Introduction and overview," New Zealand Economic Papers, Taylor & Francis Journals, vol. 46(1), pages 1-10, November.
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    Cited by:

    1. Oliver Browne & Stephen Poletti & David Young, 2012. "Simulating market power in the New Zealand electricity market," New Zealand Economic Papers, Taylor & Francis Journals, vol. 46(1), pages 35-50, December.
    2. Poletti, Stephen, 2021. "Market Power in the New Zealand electricity wholesale market 2010–2016," Energy Economics, Elsevier, vol. 94(C).

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    1. Oliver Browne & Stephen Poletti & David Young, 2012. "Simulating market power in the New Zealand electricity market," New Zealand Economic Papers, Taylor & Francis Journals, vol. 46(1), pages 35-50, December.
    2. Evans, Lewis, 2013. "Competition policy development in New Zealand," Working Paper Series 4322, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.

    More about this item

    Keywords

    Wolak Report; electricity markets; market power;
    All these keywords.

    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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