Nonparametric Tests for Perfect Competition: Theory and Application to the Nordic Wholesale Electricity Market

Per Hjertstrand () and Thomas Tangerås ()
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Per Hjertstrand: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden, https://www.ifn.se/en/researchers/affiliated-researchers/per-hjertstrand/
Thomas Tangerås: Mälardalen University and, Postal: Research Institute of Industrial Economics (IFN), Stockholm, Sweden, https://www.ifn.se/en/researchers/ifn-researcher/thomas-tangeras/

No 1527, Working Paper Series from Research Institute of Industrial Economics

Abstract: This paper develops a simple nonparametric test for perfect competition in markets for homogeneous goods. The method only requires data on prices and some aggregate of output. We then generalize the method to account for variable capacity and intertemporal production decisions. We apply the method to a sample of Swedish data from the Nordic wholesale electricity market. The main results show that the data are approximately rationalizable by perfect competition in bidding zones with low ownership concentration of generation assets, but not in bidding zones characterized by high ownership concentration.

Keywords: Competition; Nonparametric methods; Nord Pool power exchange; Wholesale electricity markets (search for similar items in EconPapers)
JEL-codes: D22 D43 D44 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2025-06-10
New Economics Papers: this item is included in nep-com
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