Competition with Forward Contracts: A Laboratory Analysis Motivated by Electricity Market Design

Jordi Brandts, Paul Pezanis-Christou and Arthur Schram

UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)

Abstract: We use experiments to study the efficiency effects for a market as a whole of adding the possibility of forward contracting to a pre-existing spot market. We deal separately with the cases where spot market competition is in quantities and where it is in supply functions. In both cases we compare the effect of adding a contract market with the introduction of an additional competitor, changing the market structure from a triopoly to a quadropoly. 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.

Keywords: Electricity Markets; Forward Markets; Experiments; Competition (search for similar items in EconPapers)
JEL-codes: C92 D43 L11 L94 (search for similar items in EconPapers)
Pages: 43
Date: 2003-07-17
New Economics Papers: this item is included in nep-exp and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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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)
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)
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Persistent link: https://EconPapers.repec.org/RePEc:aub:autbar:581.03

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