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The Impact of Different Unbundling Scenarios on Wholesale Prices in Energy Markets

Christoph Bremberger, Francisca Bremberger, and Margarethe Rammerstorfer

Year: 2012
Volume: Volume 33
Number: Number 3
DOI: 10.5547/01956574.33.3.7
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Abstract:
A recent highly disputed subject of regulating energy markets in Europe is the unbundling of vertically integrated up-and downstream firms. While legal unbundling is already implemented in most countries and indisputable in its necessity for approaching regulatory aims, continuative models such as ownership unbundling are still ambiguous. The following article contributes to the economic analysis of identifying the differences of these separate types of unbundling by concentrating on competition effects and the possibility to conceal true marginal costs. Via simulation, we find that legal unbundling yields the lowest prices in a market under Cournot competition. Moreover, under Bertrand competition, no differences between legal unbundling and ownership unbundling can be identified. Keywords: Electricity Market Modeling and Simulation, Cournot Competition, Vertical Relations, Unbundling



Short Run Effects of Bleaker Prospects for Oligopolistic Producers of a Non-renewable Resource

Kristine Grimsrud, Knut Einar Rosendahl, Halvor B. Storrøsten, and Marina Tsygankova

Year: 2016
Volume: Volume 37
Number: Number 3
DOI: 10.5547/01956574.37.3.kgr
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Abstract:
In a non-renewable resource market with imperfect competition, both the resource rent and the current market influence large resource owners' optimal supply. New information regarding future market conditions that affect the resource rent will consequently impact current supply. Bleaker demand prospects tend to accelerate resource extraction. We show, however, that it may slow down early extraction by producers with sufficiently large reserves and thus small resource rents. The reason is that the supply from such producers is driven more by current market considerations than concern about resource scarcity. As producers with relatively smaller reserves accelerate their supply in response to bleaker demand prospects, producers with sufficiently large reserves will reduce their current supply. The surge in shale gas production will reduce residual demand facing suppliers to the European gas market. We demonstrate the effects of this in a numerical model. Most gas producers accelerate their supply while Russia reduces its supply slightly and thus loses market shares even before the additional gas enters the market.





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