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An Oligopolistic Electricity Market Model with Interdependent Segments

Pierre-Olivier Pineau and Georges Zaccour

Year: 2007
Volume: Volume 28
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No3-9
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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.

A Dynamic Oligopolistic Electricity Market with Interdependent Market Segments

Pierre-Olivier Pineau, Hasina Rasata, and Georges Zaccour

Year: 2011
Volume: Volume 32
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol32-No4-9
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We propose a deterministic, discrete-time, finite-horizon oligopoly model to investigate investment and production equilibrium strategies, in a setting where demand evolves over time and the two market-segment loads (peak-and base-load) are interdependent. The players (generators) compete a` la Cournot, open-loop Nash equilibria are computed and numerical results are discussed. The model is calibrated with data from Ontario, Canada. We assess the impact on equilibrium strategies of a generation sector with more market power than what is actually the case. We also find a slight difference in the investment sequence when interdependent demand segments are considered. Finally, we analyze the impact of increasing demand elasticities over time, and varying the financial values of the production capacities that remain at the end of the planning horizon. We believe that such a tool is valuable for professionals and scholars interested in the dynamics of production capacity mix (portfolio of technologies) in the electricity sector. It is also of paramount importance for public decision makers who have to simultaneously deal with environmental issues and with price control, both of which are politically sensitive.

Reciprocal Dumping under Dichotomous Regulation

Sébastien Debia and Georges Zaccour

Year: 2022
Volume: Volume 43
Number: Number 5
DOI: 10.5547/01956574.43.5.sdeb
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An essential ingredient to net-zero-emissions policies is to regionally integrate electricity markets. But electricity cross-border trades are often assessed as inefficient. We explain this inefficiency by the presence of a dichotomous regulation: producers are highly regulated with regard to their local activities, but weakly regulated when it comes to their exports. Such a dichotomy in regulation can be generalized to every economic sector, with varying intensity. We develop a generic 2-player 2-stage game theoretical framework where producers anticipate the impact of their exports on the clearing of regulated local markets. We characterize the subgame-perfect Nash equilibrium of the game as a function of the relative price-elasticity between markets. Overall, dichotomous regulation leads producers to over-export in order to create scarcity in their home market. Hence, despite that local markets clear efficiently, the global equilibrium is inefficient. When the two jurisdictions are relatively symmetric, the equilibrium is Pareto-dominated by the first-best outcome. These results call for better coordination between regulators across different jurisdictions.

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