Demand Elasticity and Market Power in the Spanish Electricity Market

Aitor Ciarreta () and Maria Paz Espinosa

No 606, Working Papers from Departament Empresa, Universitat Autònoma de Barcelona

Abstract: In this paper we check wether generators' bid behavior at the Spanish wholesale electricity market is consistent with the hypothesis of profit maximization on their residual demands. Using OMEL data, we find the arc-electricity of residual demand around the system marginal price. The results suggest that the larger firms are not actually profit-maximizition on their residual demands while smaller generators' behavior is consistent with profit maximization. We argue how the regulatory environment may drive these results. Finally, we repeat the analysis for the firstsession of the intra-day market where presumably firms may not have the same incentives as in the day-ahead market.

Keywords: Market power; electricity market; residual demand elasticity; profit maximization. (search for similar items in EconPapers)
JEL-codes: L11 L13 L51 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2006-06, Revised 2006-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Working Papers at the Department of Business, July 2006 pages 1-27

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