Incumbent Vertical Market Power, Experimentation, and Institutional Design in the Deregulating Electricity Industry

31 Pages Posted: 25 Jun 2012 Last revised: 5 Jun 2014

See all articles by L. Lynne Kiesling

L. Lynne Kiesling

Northwestern University; University of Colorado Denver; Knowledge Problem LLC

Date Written: June 3, 2014

Abstract

Incumbent vertical market power in deregulating markets can be anticompetitive, as seen in the current process of retail electricity restructuring. This paper uses the AT&T antitrust case’s Bell Doctrine precedent of “quarantine the monopoly” as a case study in incumbent vertical market power in a regulated industry. It then extends the Bell Doctrine by presenting an experimentation-based theory of competition, and applies this extended framework to analyzing the changing retail electricity industry. The general failure to quarantine the monopoly wires segment and its regulated monopolist from the potentially competitive downstream retail market contributes to the slow pace and lackluster performance of retail electricity markets for residential customers.

Keywords: regulation, electricity, rate-of-return regulation, competition policy, Schumpeter, Kirzner, entrepreneur, innovation, smart grid

JEL Classification: D42, K23, L26, L43, L94, O33

Suggested Citation

Kiesling, L. Lynne, Incumbent Vertical Market Power, Experimentation, and Institutional Design in the Deregulating Electricity Industry (June 3, 2014). Available at SSRN: https://ssrn.com/abstract=2091719 or http://dx.doi.org/10.2139/ssrn.2091719

L. Lynne Kiesling (Contact Author)

Northwestern University ( email )

375 E Chicago Ave
Chicago, IL 60611
United States

University of Colorado Denver ( email )

1475 Lawrence St
Denver, CO 80238-3363
United States

Knowledge Problem LLC ( email )

Chicago, IL 60613
United States

HOME PAGE: http://www.lynnekiesling.com

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