Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 1527: Nonparametric Tests for Perfect Competition: Theory and Application to the Nordic Wholesale Electricity Market

Per Hjertstrand () and Thomas Tangerås ()
Additional contact information
Per Hjertstrand: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Thomas Tangerås: Mälardalen University and, Postal: Research Institute of Industrial Economics (IFN), Stockholm, Sweden

Abstract: This paper develops a simple nonparametric test for perfect competition in markets for homogeneous goods. The method only requires data on prices and some aggregate of output. We then generalize the method to account for variable capacity and intertemporal production decisions. We apply the method to a sample of Swedish data from the Nordic wholesale electricity market. The main results show that the data are approximately rationalizable by perfect competition in bidding zones with low ownership concentration of generation assets, but not in bidding zones characterized by high ownership concentration.

Keywords: Competition; Nonparametric methods; Nord Pool power exchange; Wholesale electricity markets

JEL-codes: D22; D43; D44

Language: English

29 pages, June 10, 2025

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