Barring consumers from the electricity network might improve welfare

Bert Willems

Energy, Transport and Environment Working Papers Series from KU Leuven, Department of Economics - Research Group Energy, Transport and Environment

Abstract: A monopolist supplies a homogenous good to two geographically separated markets. Production costs and demand conditions are di?erent in each market. A line with a limited transport capacity connects both markets. The paper compares two institutional frameworks: (1) exclusive access to the line is granted to the monopolist (2) access to the line is auctioned to the monopolist and consumers. It derives the monopolist's strategy, and illustrates the result with examples. In general, it is not clear-cut which regime gives the highest total surplus. For linear demand functions exclusive access is superior to auctioning, if transport capacity is small, cost differences are large and demand conditions similar.

Keywords: Electricity; Monopoly; Transmission; Congestion; Price discrimination; Unbundling; Deregulation (search for similar items in EconPapers)
JEL-codes: D42 L12 L42 L9 R41 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2002-12
New Economics Papers: this item is included in nep-com, nep-ene and nep-ind
References: Add references at CitEc
Citations: View citations in EconPapers (4)

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