Strategic Pricing when Electricity is Storable

Alfredo Garcia, James D. Reitzes, Ennio Stacchetti

    Research output: Contribution to journalArticle

    Abstract

    In this paper, we develop a simplified oligopoly model where hydro generators engage in dynamic Bertrand competition. Each player uses a Markov strategy based on the state of water reservoirs at the beginning of each period. The replenishing of water reservoirs, which affects generators' productive capacity, is governed by a stochastic process. Also, a price cap, i.e. a maximum bid allowed, is imposed on the market. We develop valuable insights for regulatory policy in predominantly hydro based electricity markets, including the effects of price caps, the efficiency of dispatch under strategic behavior and the likelihood of collusion.

    Original languageEnglish (US)
    Pages (from-to)223-247
    Number of pages25
    JournalJournal of Regulatory Economics
    Volume20
    Issue number3
    DOIs
    StatePublished - 2001

    Fingerprint

    Price caps
    Electricity
    Water
    Strategic pricing
    Generator
    Markov strategies
    Regulatory policy
    Bertrand competition
    Electricity market
    Oligopoly
    Productive capacity
    Stochastic processes
    Strategic behavior
    Bid
    Collusion

    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this

    Strategic Pricing when Electricity is Storable. / Garcia, Alfredo; Reitzes, James D.; Stacchetti, Ennio.

    In: Journal of Regulatory Economics, Vol. 20, No. 3, 2001, p. 223-247.

    Research output: Contribution to journalArticle

    Garcia, A, Reitzes, JD & Stacchetti, E 2001, 'Strategic Pricing when Electricity is Storable', Journal of Regulatory Economics, vol. 20, no. 3, pp. 223-247. https://doi.org/10.1023/A:1011151409081
    Garcia, Alfredo ; Reitzes, James D. ; Stacchetti, Ennio. / Strategic Pricing when Electricity is Storable. In: Journal of Regulatory Economics. 2001 ; Vol. 20, No. 3. pp. 223-247.
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