Investment in Electricity Markets with Asymmetric Technologies
Talat Genc and
Henry Thille
No 909, Working Papers from University of Guelph, Department of Economics and Finance
Abstract:
We study competition between hydro and thermal electricity generators under de- mand uncertainty. Producers compete in quantities and each is constrained: the ther- mal generator by capacity and the hydro generator by water availability. We analyze a two-period game emphasizing the incentives for capacity investments by the ther- mal generator. We characterize both Markov perfect and open-loop equilibria. In the Markov perfect equilibrium, investment is discontinuous in initial capacity and higher than it is in the open-loop equilibrium. However, since there are two distortions in the model, equilibrium investment can be either higher or lower than the ecient investment.
Keywords: Electricity markets; Dynamic game; Duopoly; Capacity investment. (search for similar items in EconPapers)
JEL-codes: D24 L13 L94 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2009
New Economics Papers: this item is included in nep-ene
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Related works:
Journal Article: Investment in electricity markets with asymmetric technologies (2011)
Working Paper: Investment in Electricity Markets with Asymmetric Technologies (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:gue:guelph:2009-09.
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