Working Paper Series
Strategic Withholding through Production Failures
() and Ewa Lazarczyk
Abstract: Anecdotal evidence indicates that electricity producers
use production failures to disguise strategic reductions of capacity in
order to influence prices, but systematic evidence is lacking. We use a
quasi-experimental set up and data from the Swedish energy market to
examine such behavior. In a market without strategic withholding, the
decision of reporting a failure should be independent of the market price.
We show that marginal producers in fact base their decision to report a
failure in part on prices, which indicates that failures are a result of
economic incentives as well as of technical problems.
Keywords: Electricity markets; Urgent Market Messages (UMMs); Unplanned failures; (follow links to similar papers)
JEL-Codes: L49; L94; (follow links to similar papers)
31 pages, March 31, 2014
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