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Daily Price Cycles and Constant Margins: Recent Events in Canadian Gasoline Retailing

Benjamin Atkinson, Andrew Eckert, and Douglas S. West

Year: 2014
Volume: Volume 35
Number: Number 3
DOI: 10.5547/01956574.35.3.3
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Retail gasoline pricing in Canada has typically followed certain distinct patterns, ranging from long durations of price rigidity relative to wholesale prices to daily price cycles. This paper examines recent changes to pricing patterns in Canadian cities resulting in new equilibrium behavior, and discusses possible reasons for these changes. Using high frequency retail price data obtained from GasBuddy.com, it is demonstrated that volatility changes exhibited in Toronto appear to correspond to an increased frequency of the price cycle, and replacement of the cycle with fixed retail margins. While multiple factors may have contributed to the first pricing change, the second change corresponds closely to a refinery fire in southern Ontario; this temporary event (in conjunction with a rail strike and refinery maintenance) could have triggered a permanent change in equilibrium behavior. This paper also illustrates problems for academic researchers and policymakers when using low frequency price data to analyze pricing in a market characterized by a price cycle. Keywords: Price cycle, Gasoline retailing, Constant margins, Supply shocks

Imperfect Competition in Electricity Markets with Renewable Generation: The Role of Renewable Compensation Policies

David P. Brown and Andrew Eckert

Year: 2020
Volume: Volume 41
Number: Number 4
DOI: 10.5547/01956574.41.4.dbro
View Abstract

We analyze the effects of commonly employed renewable compensation policies on firm behavior in an imperfectly competitive market. We consider a model where firms compete for renewable capacity in an auction prior to choosing their forward positions and competing in wholesale markets. We focus on fixed and premium-priced feed-in tariff (FIT) compensation policies. We demonstrate that compensation policies impact both the types of resources that win the auction and subsequent competition. While firms have stronger incentives to exercise market power under a premium-priced FIT, they also have increased incentives to sign pro-competitive forward contracts. In net firms have stronger incentives to exercise market power under the premium-priced policy. We find conditions under which renewable resources that are more correlated with market demand are procured under a premium-priced design, while the opposite occurs under a fixed-priced policy. If the cost efficiencies associated with the �more valuable� renewable resources are sufficiently large, then welfare is higher under the premium-priced policy despite the stronger market power incentives in the wholesale market.

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