A new design for market power monitoring in the electricity market. A simulation for Italy

Simona Bigerna (), Carlo Andrea Bollino (), Maria Chiara D’Errico () and Paolo Polinori ()
Additional contact information
Simona Bigerna: University of Perugia
Carlo Andrea Bollino: University of Perugia
Maria Chiara D’Errico: University of Perugia
Paolo Polinori: University of Perugia

Economia Politica: Journal of Analytical and Institutional Economics, 2023, vol. 40, issue 1, No 11, 285-317

Abstract: Abstract The liberalization of electricity markets has been dominated by conditions of oligopoly and market power, as shown in numerous studies in empirical literature on the supply side. However, regulators have used statistical measurements to monitor the extent of market power, making little reference to founded theoretical approaches. This paper provides a new contribution to the literature on the electricity market by presenting a theoretical and empirical model to construct competitive equilibrium, and estimating market power on both the supply and demand side of the day-ahead electricity market. We implement an accurate measurement of the welfare loss associated with non-competitive market conditions, based on ex-ante demand and supply behavior.This model provides a useful analytical tool for regulators and policy-makers in order to implement pro-competitive regulation. We perform an empirical simulation to show the effects of non-competitive equilibria on the Italian hourly markets over the period 2013–2014. In an ideal competitive market, prices would be lower than historical prices by about 2–5% and quantities would be higher by about 0.5–1%.

Keywords: Electricity market; Competitive benchmark analysis; Market power; Dead weight loss (search for similar items in EconPapers)
JEL-codes: D43 L13 L81 Q41 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s40888-022-00276-6 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:epolit:v:40:y:2023:i:1:d:10.1007_s40888-022-00276-6

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/40888

DOI: 10.1007/s40888-022-00276-6

Access Statistics for this article

Economia Politica: Journal of Analytical and Institutional Economics is currently edited by Alberto Quadrio Curzio

More articles in Economia Politica: Journal of Analytical and Institutional Economics from Springer, Fondazione Edison
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().