The Impact of Regulation on Pricing Behavior in the Spanish Electricity Market

Aitor Ciarreta Antuñano and Maria Paz Espinosa

No 1988-088X, DFAEII Working Papers from University of the Basque Country - Department of Foundations of Economic Analysis II

Abstract: In this paper we measure the impact of regulatory measures which affected the Spanish electricity wholesale market in the period 2002-2005. Our approach is based on the fact that regulation changes firms' incentives and therefore their market behavior. In the absence of any regulation firms would choose profit- maximizing prices on their residual demands so that the observed gap between optimal and actual prices provides a measure of the effect of regulation. Our results indicate that regulation has decreased wholesale prices considerably, but became less effective at the end of the sample period which explains the change of regulatory regime introduced in 2006.

Keywords: regulation; electricity market; pricing (search for similar items in EconPapers)
Date: 2010-06
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Citations: View citations in EconPapers (3)

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Dpto. de Fundamentos del Análisis Económico II, = Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain

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