Measuring Market Power in Network-Constrained Markets / Christoph Graf, Frank A. Wolak.

Format:

Book

Author/Creator:

Graf, Christoph.

Contributor:

Wolak, Frank A.

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w34272.

NBER working paper series no. w34272

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2025.

Summary:

Producers in locational pricing markets have the ability to exercise market power by impacting the extent to which transport capacity constraints bind. We extend the single-location residual demand curve concept to a residual demand hypersurface that quantifies the impact of a supplier's output change at one location on prices at all locations. This concept improves our ability to explain the offers suppliers submit in the Italian locational pricing electricity market and demonstrates why the locations of a firm's generation capacity determines the size and direction of locational price changes associated with the divestment of a fixed amount of generation capacity.

Notes:

September 2025.

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