Representing the Effects of Oligopolistic Competition on Risk-Neutral Prices in Power Markets

34 Pages Posted: 11 Jun 2009 Last revised: 4 Dec 2012

See all articles by Miguel Vazquez

Miguel Vazquez

IEFE Bocconi University; Fluminense Federal University; Florence School of Regulation, RSCAS, EUI; CERI FGV

Julián Barquín

Comillas Pontifical University

Date Written: May 1, 2009

Abstract

Forward transactions are becoming increasingly important in most of electricity markets. In this view, this paper develops a methodology able to capture the complexities of power markets and incorporate them into the framework of risk-neutral probabilities. This is done by the statement of a model that split up the power price dynamics into two different components: on the one hand, a component aimed at representing costs and market power, which will be based on a static, non-cooperative game; on the other, a component representing short-term deviations from the static model.

Keywords: power markets, pricing models, market power, long-term/short-term decomposition

JEL Classification: C32, L13, Q4, C15, G13, C72

Suggested Citation

Vazquez, Miguel and Vazquez, Miguel and Barquín, Julián, Representing the Effects of Oligopolistic Competition on Risk-Neutral Prices in Power Markets (May 1, 2009). Available at SSRN: https://ssrn.com/abstract=1416791 or http://dx.doi.org/10.2139/ssrn.1416791

Miguel Vazquez (Contact Author)

Fluminense Federal University ( email )

Rua Tiradentes 17, Niteroi
CEP RJ 24210-510
Brazil

IEFE Bocconi University ( email )

Via Roentgen 1
Milan, Milan 20136
Italy

Florence School of Regulation, RSCAS, EUI ( email )

Firenze
Spain

CERI FGV ( email )

R. Dr. Neto de Araujo 320 cj 1307
Rio de Janeiro, Rio de Janeiro 22250-900
Brazil

Julián Barquín

Comillas Pontifical University ( email )

Alberto Aguilera 21
Madrid, Madrid 28015
Spain

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