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Selling Wind

Ali Kakhbod, Asuman Ozdaglar, and Ian Schneider

Year: 2021
Volume: Volume 42
Number: Number 1
DOI: 10.5547/01956574.42.1.akak
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We investigate the strategic behavior of wind producers in the presence of uncertain wind resource availability, where wind availability is correlated across firms. We study how the level of correlation between different firms' wind resources impacts strategy and market outcomes. The main insight of our analysis is that increasing heterogeneity in resource availability improves social welfare, as a function of its effects both on improving diversification and on reducing withholding by firms. We show that this insight is robust for common assumptions regarding electricity demand. The model is also used to analyze the effect of wind resource heterogeneity on firm profits and opportunities for collusion. Finally, we analyze the impacts of improving public information and weather forecasting; enhanced public forecasting increases welfare, but it is not always in the best interests of strategic producers.

Rockets and Feathers Revisited: Asymmetric Retail Gasoline Pricing in the Era of Market Transparency

Emmanuel Asane-Otoo and Bernhard C. Dannemann

Year: 2022
Volume: Volume 43
Number: Number 6
DOI: 10.5547/01956574.43.6.easa
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In this paper, we revisit the empirical observation that prices rise like rockets when input costs increase but fall like feathers when input costs decrease. The analysis draws on a novel data set that includes daily retail prices of gasoline from 12,804 stations in Germany from January 1, 2014 to December 31, 2018. Our findings based on pooled-panel asymmetric error correction models indicate that the pattern of rockets and feathers is the norm rather than the exception. Our results further show that temporal aggregation of station-level price data leads to inaccurate inferences and could account for the inconclusive findings in the literature.

Representing GASPEC with the World Gas Model

Ruud Egging, Franziska Holz, Christian von Hirschhausen and Steven A. Gabriel

Year: 2009
Volume: Volume 30
Number: Special Issue
DOI: 10.5547/ISSN0195-6574-EJ-Vol30-NoSI-7
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This paper presents results of simulating a more collusive behavior of a group of natural gas producing and exporting countries, sometimes called GASPEC. We use the World Gas Model, a dynamic, strategic representation of world gas production, trade, and consumption between 2005 and 2030. In particular, we simulate a closer cooperation of the GASPEC countries when exporting pipeline gas and liquefied natural gas; we also run a more drastic scenario where GASPEC countries deliberately hold back production. The results show that compared to our Base Case, a gas cartel would reduce total supplied quantities and induce price increases in gas importing countries up to 22%. There is evidence that the natural gas markets in Europe and North America would be affected more than other parts of the world. Lastly, the vulnerability of gas importers worldwide is further illustrated by the results of a sensitivity case in which price levels are up to 87% higher in Europe and North America.

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