Oligopolistic Competition in the Japanese Wholesale Electricity Market: A Linear Complementarity Approach

Makoto Tanaka

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: Using a linear complementarity approach, we simulate the Japanese wholesale electricity market as a transmission-constrained Cournot market. Following Hobbs (2001), our model adopts the Cournot assumption in the energy market and the Bertrand assumption in the transmission market. The Bertrand assumption means that generators consider transmission charges as being exogenous, which can be interpreted as a kind of bounded rationality. We then present a simulation analysis of the Japanese wholesale electricity market, considering eight areas linked by interconnection transmission lines. Specifically, this paper examines the potential effects of both investment in interconnection transmission lines and the divestiture of dominant players' power plants.

Pages: 32 pages
Date: 2007-04
New Economics Papers: this item is included in nep-com, nep-ene, nep-ind and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:07023

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