The Ideal Competitive Electricity Market. A simulation for Italy

Bigerna, Simona and Bollino, Carlo Andrea and D'Errico, Maria Chiara and Polinori, Paolo (2017): The Ideal Competitive Electricity Market. A simulation for Italy. Published in: Economia Politica No. 10.1007/s40888-022-00276-6 (14 July 2022): pp. 1-33.

Abstract

Liberalization in the electricity markets has been characterized by oligopoly conditions and exercise of market power, largely studied in the empirical literature on the supply side. This paper provides a new contribution to the literature on the electricity market presenting a theoretical and empirical model to construct a competitive equilibrium, estimating market power both on the supply and demand side of the day-ahead electricity market. This model provides a useful analysis tool for the policy-maker to implement pro-competitive regulation, explicitly measuring the welfare loss associated with non-competitive market conditions. Results show the effect of non-competitive equilibria for the hourly markets in the period 2013-2014. In an ideal competitive market, prices would be lower than historical prices by about 2-5% and quantities would be higher by about 0.5-1%.

• Item Type: MPRA Paper
• Commentary on: Bigerna, Simona and Bollino, Carlo Andrea and D'Errico, Maria Chiara and Polinori, Paolo (2017): The Ideal Competitive Electricity Market. A simulation for Italy. Published in: Economia Politica No. 10.1007/s40888-022-00276-6 (14 July 2022): pp. 1-33.
• Language: English
• Keywords: electricity market, competitive equilibrium analysis, market power, oligopoly, residual demand and supply function, oligopsony, dead weight loss
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; L - Industrial Organization > L8 - Industry Studies: Services > L81 - Retail and Wholesale Trade ; e-Commerce; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q41 - Demand and Supply ; Prices

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