Competition with forward contracts: a laboratory analysis motivated by electricity market design

Jordi Brandts, Paul Pezanis-Christou and Arthur Schram

Economic Journal, 2008, vol. 118, issue 525, 192-214

Abstract: We use experiments to study the efficiency effects of adding the possibility of forward contracting to a spot market. We focus on the strategic implications of a forward market and consider both quantity and supply function competition. In both cases we compare the effect of adding a contract market to the introduction of an additional competitor. We find that, as theory suggests, for both types of competition the introduction of a forward market significantly lowers prices. The combination of supply function competition with a forward market leads to high efficiency levels. Copyright 2008 The Author(s). Journal compilation Royal Economic Society 2008.

Date: 2008
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Related works:
Working Paper: Competitions with Forward Contracts: A Laboratory Analysis Motivated by Electricity Market Design (2015)
Journal Article: Competition with forward contracts: a laboratory analysis motivated by electricity market design (2008)
Working Paper: Competition with Forward Contracts: A Laboratory Analysis Motivated by Electricity Market Design (2003)
Working Paper: Competition with Forward Contracts: A Laboratory Analysis Motivated by Electricity Market Design (2003)
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