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An Oligopolistic Electricity Market Model with Interdependent Segments

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:
E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination
D42 - Market Structure, Pricing, and Design: Monopoly
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

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 Quarterly Journal of the IAEE's Energy Economics Education Foundation.