Horizontal shifts in bid curves observed in wholesale electricity markets are consistent with Cournot competition. Quantity competition reduces the informational requirements associated with evaluating market performance because the price-cost margins of all producers then depend on the same inverse residual demand curve instead of one for each firm. We apply the model to the day-ahead market of the Nordic power exchange, Nord Pool, for the years 2011-13. We reject the null hypothesis of perfect competition in all specifications. Results suggest that the average price-cost margin across the sample period was around four percent.
International Journal of Industrial Organization
Cournot Competition in Wholesale Electricity Markets: The Nordic Power Exchange, Nord Pool
Journal Article
Reference
Lundin, Erik and Thomas Tangerås (2020). “Cournot Competition in Wholesale Electricity Markets: The Nordic Power Exchange, Nord Pool”. International Journal of Industrial Organization 68, 102536. doi.org/10.1016/j.ijindorg.2019.102536
Lundin, Erik and Thomas Tangerås (2020). “Cournot Competition in Wholesale Electricity Markets: The Nordic Power Exchange, Nord Pool”. International Journal of Industrial Organization 68, 102536. doi.org/10.1016/j.ijindorg.2019.102536
Authors
Erik Lundin, Thomas Tangerås