Strategic Behaviour, Resource Valuation and Competition in Electricity Markets

28 Pages Posted: 31 Mar 2010 Last revised: 10 Apr 2010

See all articles by Miguel Andrés Espinosa

Miguel Andrés Espinosa

Universidad de los Andes, Colombia - Department of Economics

Alvaro Riascos

Universidad de los Andes, Colombia - Department of Economics

Date Written: March 8, 2010

Abstract

By means of a suitable Bayesian game we study spot electricity markets from a structural point of view. We address the problem of individual and aggregate eficciency and we show how to value water from market observables. We compare the former to engineering methods and apply our methodology to Colombian spot electricity market. Our results show that big gas and small hydro plants overbid, resources are undervalued by engineering costs and aggregate costs would have been considerably smaller if agents had played optimally. Revealed costs show a substantial gain in efficiency in the Vickrey auction compared to the actual uniform auction.

Keywords: Multi-unit auctions, Oligopoly, electricity markets

JEL Classification: D44, D43, L94

Suggested Citation

Espinosa, Miguel Andrés and Riascos, Alvaro, Strategic Behaviour, Resource Valuation and Competition in Electricity Markets (March 8, 2010). Documento CEDE No. 2010-10, Available at SSRN: https://ssrn.com/abstract=1580162 or http://dx.doi.org/10.2139/ssrn.1580162

Miguel Andrés Espinosa (Contact Author)

Universidad de los Andes, Colombia - Department of Economics ( email )

Carrera 1a No. 18A-10
Santafe de Bogota, AA4976
Colombia

Alvaro Riascos

Universidad de los Andes, Colombia - Department of Economics ( email )

Carrera 1a No. 18A-10
Santafe de Bogota, AA4976
Colombia

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