Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/81365
Authors: 
Holmberg, Pär
Year of Publication: 
2008
Series/Report no.: 
IFN Working Paper 756
Abstract: 
Forward sales is a credible commitment to aggressive spot market bidding, and it mitigates producers’ market power in electricity markets. Still it can be profitable for a producer to make such a commitment if it results in a soft response from competitors in the spot market (strategies are substitutes). The optimal contracting level of a risk-neutral producer is determined by the extent to which strategies are substitutes and the slope of the residual demand in the forward market. Conditions under which strategies are substitutes are identified for a two-stage game with supply function competition and capacity constrained producers.
Subjects: 
Supply Function Equilibrium
Forward Market
Strategic Contracting
Arbitrage
Strategic Substitutes
Oligopoly
Electricity Market
JEL: 
C72
D43
D44
G13
L13
L94
Document Type: 
Working Paper

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