The value of information in electricity investment games

Fernando Oliveira ()

Energy Policy, 2008, vol. 36, issue 7, 2364-2375

Abstract: In this paper we look at the assumptions behind a Cournot model of investment in electricity markets. We analyze how information influences investment, looking at the way common knowledge of marginal costs, expectations on the competitors' marginal costs, expectations on the level and duration of demand, and conjectures on the others' behavior, influence the value of a project. We expose how the results are highly dependent on the assumptions used, and how the investment Nash-Cournot game with perfect and complete information implies such a degree of coordination between players that the outcome of the game would be classified by any regulation law as collusive behavior. Furthermore, we introduce the concept of Nash Value of Complete Information. As an example we use a stylized model of investment in liberalized electricity markets.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:36:y:2008:i:7:p:2364-2375

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