Supply function equilibria in transportation networks

Pär Holmberg and Andy Philpott

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

Abstract: Transport constraints limit competition and arbitrageurs' possibilities of exploiting price differences between commodities in neighbouring markets. We analyze a transportation network where oligopoly producers compete with supply functions under uncertain demand, as in wholesale electricity markets. For symmetric networks with a radial structure, we show that existence of symmetric supply function equilibria (SFE) is ensured if demand shocks are sufficiently evenly distributed. We can explicitly solve for them for uniform multi-dimensional nodal demand shocks.

Keywords: Spatial competition; Multi-unit auction; Supply Function Equilibrium; Trading network; Transmission network; Wholesale electricity markets (search for similar items in EconPapers)
JEL-codes: C72 D43 D44 L91 (search for similar items in EconPapers)
Date: 2014-08-04
New Economics Papers: this item is included in nep-com, nep-net, nep-tre and nep-ure
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Related works:
Working Paper: Supply function equilibria in transportation networks (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:1421

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