Strategic Behavior and Collusion: An Application to the Spanish Electricity Market

Aitor Ciarreta Antuñano and Carlos Gutiérrez Hita

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

Abstract: The paper has two major contributions to the theory of repeated games. First, we build a supergame oligopoly model where firms compete in supply functions, we show how collusion sustainability is affected by the presence of a convex cost function, the magnitude of both the slope of demand market, and the number of rivals. Then, we compare the results with those of the traditional Cournot reversion under the same structural characteristics. We find how depending on the number of firms and the slope of the linear demand, collusion sustainability is easier under supply function than under Cournot competition. The conclusions of the models are simulated with data from the Spanish wholesale electricity market to predict lower bounds of the discount factors.

Keywords: collusion; repeated games; electricity market (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (1)

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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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