Competition in the British Electricity Spot Market

Richard Green and David M Newbery

Journal of Political Economy, 1992, vol. 100, issue 5, 929-53

Abstract: Most of the British electricity supply industry has been privatized. Two dominant generators supply bulk electricity to an unregulated "pool." They submit a supply schedule of prices for generation and receive the market-clearing price, which varies with demand. Despite claims that this should be highly competitive, the authors show that the Nash equilibrium in supply schedules implies a high markup on marginal cost and substantial deadweight losses. Further simulations, to show the effect of entry by 1994, produce somewhat lower prices at the cost of excessive entry; subdividing the generators into five firms would produce better results. Copyright 1992 by University of Chicago Press.

Date: 1992
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Working Paper: Competition in the British Electricity Spot Market (1991)
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