In this paper we consider an oligopolistic market in which one firm can be monopolist on her residual demand function and derive implications on the shape of her profit function, which we show may not be concave in price. We propose a simple price-capping rule that induce the pivotal operator to compete for quantity instead of taking advantage of her monopoly. Then, we analyze the bidding behaviour of the dominant electricity producer operating in the Italian wholesale power market (IPEX). This firm is vertically integrated and in many instances she acts as a monopolist on the residual demand. We find that, contrary to expectations, this pivotal firm refrains to exploit totally her unilateral market power and, therefore, bids at levels well below the cap. We discuss such a behaviour and derive implications for the setting of the price cap

Bosco, B., Visconti Parisio, L., & Pelagatti, M. (2012). Price capping in partially monopolistic electricity markets. In 2012 9th International Conference on the European Energy Market (pp.1-8) [10.1109/EEM.2012.6254764].

Price capping in partially monopolistic electricity markets

BOSCO, BRUNO PAOLO;VISCONTI PARISIO, LUCIA;PELAGATTI, MATTEO MARIA
2012

Abstract

In this paper we consider an oligopolistic market in which one firm can be monopolist on her residual demand function and derive implications on the shape of her profit function, which we show may not be concave in price. We propose a simple price-capping rule that induce the pivotal operator to compete for quantity instead of taking advantage of her monopoly. Then, we analyze the bidding behaviour of the dominant electricity producer operating in the Italian wholesale power market (IPEX). This firm is vertically integrated and in many instances she acts as a monopolist on the residual demand. We find that, contrary to expectations, this pivotal firm refrains to exploit totally her unilateral market power and, therefore, bids at levels well below the cap. We discuss such a behaviour and derive implications for the setting of the price cap
No
paper
Scientifica
capacity constraints; Electricity auctions; optimal bidding; price cap
English
International Conference on the European Energy Market, EEM 12 - 10 - 12 May
978-1-4673-0832-8
Bosco, B., Visconti Parisio, L., & Pelagatti, M. (2012). Price capping in partially monopolistic electricity markets. In 2012 9th International Conference on the European Energy Market (pp.1-8) [10.1109/EEM.2012.6254764].
Bosco, B; VISCONTI PARISIO, L; Pelagatti, M
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/10281/49784
Citazioni
  • Scopus 0
  • ???jsp.display-item.citation.isi??? 0
Social impact