Long-Term Supply Contracts and Collusion in the Electricity Markets

Chloe Le Coq

No 552, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: It has been argued that having a contract market before the spot market enhances competition (Allaz and Vila, 1993). Taking into account the repeated nature of electricity markets, we check the robustness of the argument that the access to contract markets reduces the market power of generators. In particular, we investigate the sensitivity of this result with respect to the finite horizon assumption. This paper proposes a model of the electricity market where firms sign long-term supply contracts with their retailers. Subsequently, the firms repeatedly interact on the spot market. It is shown that contract markets help sustain collusion on the spot market.

Keywords: Contract market; Electricity; Spot Market; Forward; Tacit collusion. (search for similar items in EconPapers)
JEL-codes: C72 D43 G13 L13 L94 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2003-05-28
New Economics Papers: this item is included in nep-com and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:hastef:0552

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