Cournot competition in the electricity market with transmission constraints

Bert Willems

Energy, Transport and Environment Working Papers Series from KU Leuven, Department of Economics - Research Group Energy, Transport and Environment

Abstract: This paper studies the market power of generators in the electricity market when transmission capacity is scarce. We consider a simple world of two generators providing electricity to their consumers through a single transmission line. In the literature, different Cournot equilibrium concepts have been developed. This paper applies these concepts and explains the implicit assumptions on the behavior of the System Operator made in those papers. We show that these implicit assumptions are not realistic. For an alternative role of the System Operator, we solve the Cournot equilibrium and compare the outcome. Furthermore, we show that the axiomatic equilibrium concept of Smeers and Wei (1997) is linked with the model of Oren (1997) and can also be defined as a Nash Equilibrium.

Pages: 35 pages
Date: 2000-11
New Economics Papers: this item is included in nep-ene, nep-ent, nep-mic and nep-net
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Citations: View citations in EconPapers (4)

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http://feb.kuleuven.be/drc/Economics/misc/ete_workingpapers/ete-wp00-4.pdf (application/pdf)

Related works:
Working Paper: Cournot Competition in the Electricity Market with Transmission Constraints (2000)
Working Paper: Cournot Competition in the Electricity Market with Transmission Constraints (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:ete:etewps:ete0004

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