Market power and strategic interaction in electricity networks

Special conditions in electric networks complicate the analysis of the geographic scope of the horizontal market power. Unlike the conventional setting where a firm exercises market power by restricting its own production, there could be situations in constraining electrical networks where a generat...

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Bibliographic Details
Published in:Resource and energy economics 1997-03, Vol.19 (1), p.109-137
Main Authors: Cardell, Judith B., Hitt, Carrie Cullen, Hogan, William W.
Format: Article
Language:English
Subjects:
Competition
Deregulation
Electric
Electric utilities
Energy policy
Imperfect competition
Network
Studies
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Summary:Special conditions in electric networks complicate the analysis of the geographic scope of the horizontal market power. Unlike the conventional setting where a firm exercises market power by restricting its own production, there could be situations in constraining electrical networks where a generator would exercise market power by increasing its production in order to block transmission of a disproportionate amount of competing generation. A model with a set of Cournot firms, a collection of competitive fringe participants and an explicit representation of the electrical network illustrates the possible strategic interactions.
ISSN:0928-7655
1873-0221
DOI:10.1016/S0928-7655(97)00006-7