Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/74384
Authors: 
Richter, Jan
Year of Publication: 
2012
Series/Report no.: 
EWI Working Paper 11/09
Abstract: 
We study the interdependency between two markets, where the first involves offering production capacity, while on the second actual production is sold. The key issue is that the expected product market outcome determines the opportunity cost for bidding at the capacity market while the capacity sold on the capacity market, since no longer available for spot market bidding, influences the product market outcome. We show that a competitive simultaneous equilibrium exists. This equilibrium is unique and efficient. It is characterized by a u-shaped bidding function in the capacity market with respect to the marginal cost of suppliers. The leading example is the electricity industry, where there is a capacity market clearing before the spot market.
Subjects: 
capacity market
procurement auction
electricity market
competitive equilibrium
JEL: 
D41
D44
L11
L94
Document Type: 
Working Paper

Files in This Item:
File
Size
962.51 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.