Scandinavian Working Papers in Economics
Working Paper Series,
Research Institute of Industrial Economics
No 1191: Cournot Competition in Wholesale Electricity Markets: The Nordic Power Exchange, Nord Pool
Erik Lundin () and Thomas Tangerås ()
Additional contact information
Erik Lundin: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden
Thomas Tangerås: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden
Abstract: Horizontal shifts in bid curves observed in wholesale electricity markets are consistent with Cournot competition. Quantity competition reduces the informational requirements associated with evaluating market performance because the markups of all producers then depend on the same inverse residual demand curve instead of one for each firm. We apply the model to the day-ahead market of the Nordic power exchange, Nord Pool, for the years 2011–2013. Results suggest that mark-ups were 8–11 percent. We find some support for the hypothesis that the division of Sweden into price areas in 2011 increased the exercise of market power.
Keywords: Cournot competition; Market design; Market performance; Nord Pool; Walrasian auction; Wholesale electricity market
26 pages, November 21, 2017
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wp1191.pdf
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