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Sequential Markets, Market Power and Arbitrage / Koichiro Ito, Mar Reguant.
- Format:
- Book
- Author/Creator:
- Ito, Koichiro.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w20782.
- NBER working paper series no. w20782
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2014.
- Summary:
- We develop a theoretical framework to characterize strategic behavior in sequential markets under imperfect competition and limited arbitrage. Our theory predicts that these two elements can generate a systematic price premium. We test the model predictions using micro-data from the Iberian electricity market. We show that the observed price differences and firm behavior are consistent with the model. Finally, we quantify the welfare effects of arbitrage using a structural model. In our setting, we show that full arbitrage is not necessarily welfare-enhancing in the presence of market power, reducing consumer costs but decreasing productive efficiency.
- Notes:
- Print version record
- December 2014.
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