Temporary Bottlenecks, Hydropower and Acquisitions*

Jostein Skaar and Lars Sørgard

Scandinavian Journal of Economics, 2006, vol. 108, issue 3, 481-497

Abstract: We apply a model with four markets, two regions and two time periods, to study the effects of an acquisition in a hydropower system with temporary bottlenecks. The effect on welfare is found to be ambiguous. In some instances an acquisition leads to larger differences in prices between markets, which gives rise to an increase in deadweight loss. In other instances it leads to a reduction in price differences between markets, particularly if the dominant firm acquires a firm which was active in the market where the dominant firm used to dump its production before the acquisition.

Date: 2006
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https://doi.org/10.1111/j.1467-9442.2006.00467.x

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