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An Oligopolistic Electricity Market Model with Interdependent Segments

Abstract:
In this paper,we model a two-period electricity market with interdependent demand, where oligopolistic generators make investments in peak-and base-load capacities. Different prices are obtained in the two periods, and residential consumers can react to prices across demand periods. We characterize the Cournot equilibrium obtained as a function of price and cross-price effects and present a numerical illustration based on the Ontario (Canada) electricity market.

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Energy Specializations: Energy Modeling – Energy Data, Modeling, and Policy Analysis; Electricity – Markets and Prices ; Electricity – Policy and Regulation

JEL Codes: Q40: Energy: General, Q42: Alternative Energy Sources, D24: Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity, Q54: Climate; Natural Disasters and Their Management; Global Warming

Keywords: Electricity markets, Interdependent demand, Nash Equilibrium, Oligopoly, Liberalization, Ontario Canada

DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No3-9

Published in Volume 28, Number 3 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

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