Multiple Openings and Competitiveness of Forward Markets: Experimental Evidence

Abstract

We test the competition enhancing effect of selling forward in experimental Cournot duopoly and quadropoly with multiple forward markets. We find that two forward periods yields competitive outcomes and that the results are very close to the predicted theoretical results for quantity setting duopolies and quadropolies. Our experiments lend strong support to the hypothesis that forward markets are competition enhancing. We then test a new market that allows for endogenously determined indefinitely many forward periods that only close when sellers coordinate on selling a zero amount in a forward market. We find that the outcomes under an endogenous close rule are also very competitive. These results hold for both duopolies and quadropolies.

Support schemes for renewable electricity in the European Union: Producer strategies and competition

“…7 The pro-competitive impact of forward electricity markets was conrmed experimentally by Le Coq and Orzen (2006), Brandts et al (2008), van Koten andOrtmann (2013) and Ferreira et al (2016). Further evidence has been provided by the empirical literature (e.g.…”

Two-Period Duopolies with Forward Markets

“…We use random, anonymous re-matching across rounds to allow subjects to learn about the decision environment while minimizing the possibility of collusive strategies or other repeated game effects, as is common practice in many laboratory experiments (see, e.g. Andreoni and Croson, 2008;Ferreira et al, 2016). While there is a positive probability of random re-matching with a previous rival, subjects do not see any identifiers of rivals on which to condition behavior.…”