Demand Elasticity and Market Power in the Spanish Electricity Market

Aitor Ciarreta Antuñano () and Maria Paz Espinosa ()

Working Papers from Department of Business Economics, Universitat Autonoma de Barcelona

Abstract: In this paper we check whether generators' bid behavior at the Spanish wholesale electricity market is consistent with the hypothesis of pro?fit maximization on their residual demands. Using OMEL data, we ?find the arc-elasticity of the residual demand around the system marginal price. The results suggest that the larger ?firms are not actually pro?fit-maximizing on their residual demands while smaller generators' behavior is consistent with profit maximization. We argue how the regulatory environment may drive these results. Finally, we repeat the analysis for the ?first session of the intra-day market where presumably ?firms may not have the same incentives as in the day-ahead market

Keywords: market power; electricity market; residual demand elasticity; pro?fit maximization (search for similar items in EconPapers)
JEL-codes: L11 L13 L51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ene, nep-ind and nep-mic
Date: 2006-07
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http://selene.uab.es/dep-economia-empresa/documents/06-6.pdf First version, 2006 (application/pdf)

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Persistent link: http://EconPapers.repec.org/RePEc:bbe:wpaper:200606

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