Strategic Bidding in Electricity Pools with Short-Lived Bids: An Application to the Spanish Market

Marín Uribe, Pedro Luis and García-Díaz, Antón

No 2567, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We generalize von der Fehr and Harbord's (1993) multi-unit auction model for the case of a deterministic demand allowing for any technology mix and elastic demand in order to account for demand side bidding. We obtain a general characterization of the equilibrium and show that the Cournot model overestimates market power in pool markets. We simulate the Spanish electricity pool and show that price-cost margins substantially increased with the 1996 merger that took the industry from a six firm structure to its current four firm structure. This is almost equivalent to a nearly symmetric duopoly. The introduction of demand-side bidding is not likely to change this situation.

Keywords: Electricity pools; Bids; market power (search for similar items in EconPapers)
JEL-codes: K23 L13 L94 (search for similar items in EconPapers)
Date: 2000-09
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Citations: View citations in EconPapers (3)

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