Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/93924 
Year of Publication: 
2008
Series/Report no.: 
SFB/TR 15 Discussion Paper No. 236
Publisher: 
Sonderforschungsbereich/Transregio 15 - Governance and the Efficiency of Economic Systems (GESY), München
Abstract: 
Prices may di er between regional markets if transport capacities are limited. We develop a new approach to determine to which extent such di erences stem from limited participation in cross-border trader rather than from bottlenecks. We derive a theoretical integration benchmark for the typical case where transportation markets clear before the product markets, using Grossman's (1976) notion of a rational expectations equilibrium. We compare the benchmark to data from European electricity markets. The data reject the integration hypothesis: Capacity prices contain too little information about spot price di erential; this indicates that well informed traders do not engage in cross-border trade.
Subjects: 
Market integration
electricity markets
interconnector
competition policy
rational expectations equilibrium
JEL: 
G14
D84
L94
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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