The Ideal Competitive Electricity Market. A Simulation for Italy

43 Pages Posted: 9 Jul 2019 Last revised: 25 Sep 2019

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: December 29, 2017

Abstract

Liberalization in the electricity markets has been characterized by oligopoly conditions and exercise of market power, largely studied in the empirical literature on the supply side. This paper provides a new contribution to the literature on the electricity market presenting a theoretical and empirical model to construct a competitive equilibrium, estimating market power both on the supply and demand side of the day-ahead electricity market. This model provides a useful analysis tool for the policy-maker to implement pro-competitive regulation, explicitly measuring the welfare loss associated with non-competitive market conditions. Results show the effect of non-competitive equilibria for the hourly markets in the period 2013-2014. In an ideal competitive market, prices would be lower than historical prices by about 2-5% and quantities would be higher by about 0.5-1%.

Keywords: electricity market, competitive equilibrium analysis, market power, oligopoly, residual demand and supply function, oligopsony, dead weight loss

JEL Classification: D01, D43, L13, L81, Q41

Suggested Citation

Bigerna, Simona and Bollino, Carlo Andrea and D'Errico, Maria Chiara and Polinori, Paolo, The Ideal Competitive Electricity Market. A Simulation for Italy (December 29, 2017). Available at SSRN: https://ssrn.com/abstract=3415774 or http://dx.doi.org/10.2139/ssrn.3415774

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

University of Perugia - Department of Economics ( email )

via Pascoli, 20
PG 06123 Perugia, 06123
Italy

Paolo Polinori (Contact Author)

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

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
11
Abstract Views
237
PlumX Metrics