Working Paper No. 1191

Cournot Competition in Wholesale Electricity Markets: The Nordic Power Exchange, Nord Pool

Published: November 21, 2017Pages: 26Keywords: Cournot competition; Market design; Market performance; Nord Pool; Walrasian auction; Wholesale electricity market JEL-codes: D22; D43; D44; D40

Cournot Competition in Wholesale Electricity Markets: The Nordic Power Exchange, Nord Pool Erik Lundin and Thomas Tangerås


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 markups 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 2011–2013. Results suggest that mark-ups were 8–11 percent. We find some support for the hypothesis that the division of Sweden into price areas in 2011 increased the exercise of market power.

Erik Lundin

Contact

Mob: +46 70 752 5847
erik.lundin@ifn.se

Thomas Tangerås

Contact

Ph: +46 8 665 4526
Mob: +46 70 727 5448
thomas.tangeras@ifn.se

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Martin Ljunge, IFN, is the author of a chapter, "Trust promotes health: addressing reverse causality by studying children of immigrants", in a new book edited by Sherman Folland and Eric Nauenberg. The cutting edge of research is presented, covering the ever-expanding social capital field.

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