Strategic Reneging in Sequential Imperfect Markets

David Benatia and Etienne Billette de Villemeur

No 2019-19, Working Papers from Center for Research in Economics and Statistics

Abstract: This paper investigates the incentives to manipulate sequential markets by strategically reneging on forward commitments. We first study the behavior of a monopolist in a two-period model with demand uncertainty. Our results deliver guidance for identifying manipulations and evaluating its market impacts. We then test the model's predictions using occurrences of reneging on long-term commitments in Alberta's electricity market. We implement a machine learning approach to identify and evaluate manipulations. We find that a dominant supplier increased its revenues by $35 million during the winter of 2010-11, causing Alberta's electricity procurement costs to increase by above $330 million (20%).

Keywords: Imperfect Commitment; Market Manipulation; Market Power; Electricity Markets. (search for similar items in EconPapers)
JEL-codes: D43 L12 L51 L94 (search for similar items in EconPapers)
Pages: 70 pages
Date: 2019-10-11
New Economics Papers: this item is included in nep-com, nep-ene, nep-ore and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Strategic Reneging in Sequential Imperfect Markets (2020)
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