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Title:Long-term supply contracts and collusion in the electricity market PDF Logo
Authors:Le Coq, Chloé
Issue Date:2004
Series/Report no.:SSE/EFI Working Paper Series in Economics and Finance 552
Abstract:It has been argued that having a contract market before the spot market enhances competition (Allaz and Vila, 1993). Taking into account the repeated nature of electricity markets, we check the robustness of the argument that the access to contract markets reduces the market power of generators. In particular, we investigate the sensitivity of this result with respect to the finite horizon assumption. This paper proposes a model of the electricity market where firms sign long-term supply contracts with their retailers. Subsequently, the firms repeatedly interact on the spot market. It is shown that contract markets help sustain collusion on the spot market.
Subjects:Contract market
Electricity
Spot Market
Forward
Tacit collusion
JEL:C72
D43
G13
L13
L94
Document Type:Working Paper
Appears in Collections:SSE/EFI Working Paper Series in Economics and Finance, EFI - The Economic Research Institute, Stockholm School of Economics

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