Market Power in the England and Wales Wholesale Electricity Market 1995-2000

Andrew Sweeting

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

Abstract: This paper shows that generators exercised increasing market power in the England and Wales wholesale electricity market in the second half of the 1990s despite declining market concentration. It examines whether this was consistent with static, non-cooperative oligopoly models, which are widely used to model electricity markets, by testing the static Nash equilibrium assumption that each generator chose its bids to maximise its current profits taking the bids of other generators as given. It finds a significant change in behaviour in late 1996. In 1995 and 1996 generator behaviour was consistent with the static Nash equilibrium assumption if the majority of their output was covered by financial contracts which hedged prices. After 1996 their behaviour was inconsistent with the static Nash equilibrium assumption given their contract cover but it was consistent with tacit collusion.

Keywords: static oligopoly models; market power; Nash equilibrium; tacit collusion; electricity markets (search for similar items in EconPapers)
JEL-codes: C72 D43 L13 L51 L94 (search for similar items in EconPapers)
Pages: 44
Date: 2004-10
New Economics Papers: this item is included in nep-bec, nep-com and nep-mic
Note: CMI,IO
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Market Power In The England And Wales Wholesale Electricity Market 1995-2000 (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:0455

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