Revistas Académicas WoS

Long-term Contract Auctions and Market Power in Regulated Industries

A number of countries with oligopolistic power industries have used marginal cost pricing to set the price of energy for small customers. This course of action, however, does not necessarily ensure an efficient outcome when competition is imperfect. The purpose of this paper is to study how the auction of long-term contracts could reduce market power. We do so in a two firm, two-technology, linear-cost, static model where demand is summarized by a price inelastic load curve. In this context we show that the larger the proportion of total demand auctioned in advance, the lower are both the contract and the average spot price of energy.
Energy Policy, Vol. 38, No. 4, pp. 1.759 - 1.763, Abril, 2010
Autor(es): Arellano María, Serra Pablo