Measuring Market Power in Network-Constrained Markets

Christoph Graf and Frank A. Wolak

No 34272, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Producers in locational pricing markets have the ability to exercise market power by impacting the extent to which transport capacity constraints bind. We extend the single-location residual demand curve concept to a residual demand hypersurface that quantifies the impact of a supplier’s output change at one location on prices at all locations. This concept improves our ability to explain the offers suppliers submit in the Italian locational pricing electricity market and demonstrates why the locations of a firm’s generation capacity determines the size and direction of locational price changes associated with the divestment of a fixed amount of generation capacity.

JEL-codes: L10 L13 Q48 (search for similar items in EconPapers)
Date: 2025-09
New Economics Papers: this item is included in nep-com and nep-reg
Note: EEE IO
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