Evaluation of Monopoly Neighborhood and its Relation with Monopoly Power: Case Study of Iran’s Electricity Market

Siab Mamipour, Marziyeh Zeinali () and Kioumars Heydari ()
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Marziyeh Zeinali: MA Student in Economics, University of Kharazmi, Tehran, Iran
Kioumars Heydari: Ph.D. in Energy Economics, Ministry of Energy, Tehran, Iran

Quarterly Journal of Applied Theories of Economics, 2016, vol. 3, issue 1, 29-58

Abstract: More than three decades passes from start of a procedure called structure renewal in electricity industry of different countries. Moving to the competitive prices instead of adjusted rates has enabled some institutions to increase prices and experience market power. This issue can significantly endanger benefits caused by releases for consumers. Various indexes is presented for measurement of capability of applying market power up to now but issue of differentiation of electricity from other products due to its features is not considered in any of these indexes. As we Know, Iran has formed in the electricity market since 2003, and important structural changes have occurred in the electricity market. In this regard, this study by introducing a new index in market power (monopoly neighborhood index) tries to evaluate level of potential of monopoly power with regard to some features of electricity market for seventeen powerhouses in period of 2012 in Iran. In order to testing competence of this index in comparison to other indexes which are available for measuring potential of monopoly power, correlation of results obtained from each of indexes are investigated with increase of market price toward base competitive level. Results show that monopoly neighborhood index has more competence in comparison to the other structural indexes in estimation of potential of monopoly power in Iran's electricity market.

Keywords: Market power; Monopoly neighborhood index; Lerner index; Electricity market (search for similar items in EconPapers)
JEL-codes: D42 D47 L12 (search for similar items in EconPapers)
Date: 2016
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