The More Cooperation, the More Competition? A Cournot Analysis of the Benefits of Electric Market Coupling

Benjamin Hobbs () and Fieke A. M. Rijkers

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: Market coupling in Belgian and Dutch markets would permit more efficient use of intercountry transmission, 1) by counting only net flows against transmission limits, 2) by improving access to the Belgian market, and 3) by eliminating the mismatch in timing between interface auctions and the energy spot market. A Cournot market model that accounts for the region’s transmission pricing rules and limitations is used to simulate market outcomes with and without market coupling. This accounts for 1) and 2). Market coupling improves social surplus in the order of 108 €/year, unless it encourages the largest producer in the region to switch from a price-taking strategy in Belgium to a Cournot strategy due to a perceived diminishment of the threat of regulatory intervention. Benefit to Dutch consumers depends on the behavior of this company. The results illustrate how large-scale oligopoly models can be useful for assessing market integration.

Keywords: Electric power; Electric transmission; Liberalization; Oligopoly; Complementarity models; Computational models; Netherlands; Belgium; France; Germany; Market Coupling (search for similar items in EconPapers)
Pages: 38
Date: 2005-01
New Economics Papers: this item is included in nep-cmp, nep-com, nep-ene, nep-ind and nep-mic
Note: CMI, IO
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (38)

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Journal Article: The More Cooperation, The More Competition? A Cournot Analysis of the Benefits of Electric Market Coupling (2005)
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