Price Wars and Collusion in the Spanish Electricity Market

Natalia Fabra () and Juan Toro
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Juan Toro: Oxford University

Industrial Organization from EconWPA

Abstract: \We analyze the time-series of prices in the Spanish electricity market by means of a time varying-transition-probability Markov switching model. Accounting for changes in demand and cost conditions (which reflect changes in input costs, capacity availability and hydro power), we show that the time-series of prices is characterized by two significantly different price levels. Based on a Green and Porter (1984)'s type of model that introduces several institutional details, we construct trigger variables that affect the likelihood of starting a price war. By interpreting the signs of the triggers, we are able to infer some of the properties of the collusive strategy that firms might have followed. We obtain more empirical support to Green and Porter's model than previous studies. REVISED: January 2004

Keywords: Electricity Markets; Collusion; Markov Switching (search for similar items in EconPapers)
JEL-codes: C22 L13 L94 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ene and nep-ind
Date: 2002-12-09, Revised 2004-01-26
Note: Type of Document - Tex; prepared on IBM PC -; to print on PostScript; pages: 27
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Related works:
Working Paper: Price Wars and Collusion in the Spanish Electricity Market (2001)
Journal Article: Price wars and collusion in the Spanish electricity market (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpio:0212001

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