Liberalizing the Gas Industry: Take-or-Pay Contracts, Retail Competition and Wholesale Trade
Michele Polo () and
Carlo Scarpa ()
No 49, IEFE Working Papers from IEFE, Center for Research on Energy and Environmental Economics and Policy, Universita' Bocconi, Milano, Italy
This paper examines retail competition in a liberalized gas market. Vertically integrated firms run both wholesale activities (buying gas from the producers under take-or-pay obligations) and retail activities (selling gas to final customers). The market is decentralized and the firms decide which customers to serve, competing then in prices. We show that TOP clauses limit the incentives to face-to-face competition and determine segmentation and monopoly pricing even when entry of new competitors occurs. The development of wholesale trade, instead, may induce generalized entry and retail competition. This equilibrium outcome is obtained if a compulsory wholesale market is introduced, even when firms are vertically integrated, or under vertical separation of wholesale and retail activites when firms can use only linear bilateral contracts.
Keywords: Entry; Segmentation; capacity constraints; wholesale markets. (search for similar items in EconPapers)
JEL-codes: L11 L13 L95 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-com, nep-ene and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Journal Article: Liberalizing the gas industry: Take-or-pay contracts, retail competition and wholesale trade (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bcu:iefewp:iefewp49
Access Statistics for this paper
More papers in IEFE Working Papers from IEFE, Center for Research on Energy and Environmental Economics and Policy, Universita' Bocconi, Milano, Italy Via Röntgen, 1 - 20136 Milano - Italy. Contact information at EDIRC.
Bibliographic data for series maintained by Elena Dal Zotto ().