Competitive Equilibrium in the Italian Wholesale Electricity Market

46 Pages Posted: 11 Dec 2015

See all articles by Simona Bigerna

Simona Bigerna

Department of Economics, University of Perugia

Carlo Andrea Bollino

University of Perugia

Maria Chiara D'Errico

University of Perugia - Department of Economics

Paolo Polinori

University of Perugia - Department of Economics

Date Written: June 19, 2015

Abstract

The market power analysis in electricity market is relevant for understanding the competitive development of the industry’s restructuring and the liberalization process. The paper analyzes the market power exercised by power generators in the Italian wholesale electricity market. Following the approach of Wolak (2003, 2009), the extent of market power is measured using the Lerner index computed as the inverse of arc elasticity of the residual demand faced by each Cournot competitors. Then, the market supply curves have been adjusted to entail market power effects and the new market resolutions were derived. The new equilibrium prices are the competitive ones and represent the market clearing price that would have been if the electricity market was competitive and the effects of unilateral market power were removed.

Keywords: Market Power, Residual Demand,Lerner Index, Transmission Consraint

JEL Classification: D43

Suggested Citation

Bigerna, Simona and Bollino, Carlo Andrea and D'Errico, Maria Chiara and Polinori, Paolo, Competitive Equilibrium in the Italian Wholesale Electricity Market (June 19, 2015). Available at SSRN: https://ssrn.com/abstract=2620643 or http://dx.doi.org/10.2139/ssrn.2620643

Simona Bigerna

Department of Economics, University of Perugia ( email )

Via A. Pascoli
Perugia, 06123
Italy

Carlo Andrea Bollino

University of Perugia

Via Pascoli 22
Perigoa, 06121
Italy

Maria Chiara D'Errico (Contact Author)

University of Perugia - Department of Economics ( email )

via Pascoli, 20
PG 06123 Perugia, 06123
Italy

Paolo Polinori

University of Perugia - Department of Economics ( email )

via A. Pascoli, 20
Perugia, Perugia 06123
Italy
+39 075 5855002 (Phone)
+39 075 5855299 (Fax)

HOME PAGE: http://https://www.unipg.it/personale/paolo.polinori

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