The length of contracts and collusion

Green, Richard; Coq, Chloé Le

doi:10.1016/j.ijindorg.2009.05.002

Cited by 31 publications

(21 citation statements)

References 6 publications

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“…Starting from these assumptions, and from the seminal contribution by Allaz and Vila (1993), contributions by other authors underline how the length of contracts (Green and LeCoq, 2010), strategic behaviour in the forward market (Holmberg, 2011), and asymmetries between generators (de Frutos and Fabra, 2012) matter in determining the intensity of competition in the spot market, which under the conditions outlined above is always achieved. However, as Bushnell (2007) Liski and Montero (2006) introduce dynamics in the game and find that firms can collude in the forward market as well as in the spot market.…”

Section: The Day-ahead Market"mentioning

confidence: 99%

Competition and the single electricity market: Which lessons for Ireland?

Cosmo

Lynch

2016

Utilities Policy

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: This paper examines the redesign of the Irish Single Electricity Market in order to comply with the European Target Model for electricity. In particular, this work focuses on the challenges raised by the high concentration in the generation sector which exists in the Irish electricity market. We examine the theoretical and empirical conditions under which forward markets promote competition in the spot and retail markets; in addition, we investigate the impact of concentration in the market on the new capacity payment mechanism. In order to ensure a competitive outcome for consumers, the regulatory authorities should continue to regulate the directed forward contracts made by the dominant firm; moreover, our analysis suggests that the regulator should extend regulation to the price and quantity which the dominant firm bids for holding new reliability options. Terms of use: Documents in EconStor may

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Section: The Day-ahead Market"mentioning

confidence: 99%

Competition and the single electricity market: Which lessons for Ireland?

Cosmo

Lynch

2016

Utilities Policy

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“…See Bushnell et al (2008), Fabra and Toro (2005), Hortacsu and Puller (2008), Kühn and Machado (2006), Mansur (2007), Wolak (2000) or Wolak (2007). 9 Green (1999), Newbery (1998) (Ferreira, 2003;Green and Le Coq, 2010;Liski and Montero, 2006), and tend to conclude that they have anti-competitive effects. 10 To be sure, the reasons why we recover the underpricing equilibria are similar to the ones that explain why the competitive outcome is not sustainable under Bertrand competition with capacity constraints, even though it constitutes the unique equilibrium outcome under pure Bertrand competition.…”

Section: Description Of the Modelmentioning

confidence: 99%

How to allocate forward contracts: The case of electricity markets

Frutos

Fabra²

2012

European Economic Review

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a b s t r a c tSeveral regulatory authorities worldwide have imposed forward contract commitments on electricity producers as a way to mitigate their market power. In this paper we analyze the impact of such commitments on equilibrium outcomes in a model that reflects important institutional and structural features of electricity markets. We show that, when firms are asymmetric, the distribution of contracts among firms matters. In the case of a single dominant firm, the regulator can be confident that allocating contracts to that firm will be pro competitive. However, when asymmetries are less extreme, certain contract allocations might yield anti competitive outcomes by elim inating more competitive equilibria. Our analysis thus suggests that forward contracts should be allocated so as to (virtually) reduce asymmetries across firms.

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“…It mitigates as well the risk that in the long term LTC will lead to tacit collusion on spot markets by stabilizing the market shares of an oligopoly of collectively dominant suppliers (DG Comp, 2007;Neuman and Hirschausen, 2006;Le Coq, 2004, Liski andMontero, 2004). However, Green and Le Coq (2006) suggest that the longer LTC are, the lesser is the risk that these LTC will lead to tacit collusion. The lack of a liquid spot market will not facilitate entry in retail and trading, and will thus foster volatility which encourages market players towards vertical re-integration or long-term contracting.…”

Section: C-but Ltc Can Trap European Energy Markets In a Vicious Circmentioning

confidence: 99%

Long-term energy supply contracts in European competition policy: Fuzzy not crazy

Hauteclocque

Glachant

2009

Energy Policy

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Long-term supply contracts often have ambiguous effects on the competitive structure, investment and consumer welfare in the long term. In a context of market building, these effects are likely to be worsened and thus even harder to assess. Since liberalization and especially since the release of the Energy Sector Enquiry in early 2007, the portfolio of long-term supply contracts of the former incumbents have become a priority for review by the European Commission and the national competition authorities. It is widely believed that European Competition authorities take a dogmatic view on these contracts and systemically emphasize the risk of foreclosure over their positive effects on investment and operation. This paper depicts the methodology that has emerged in the recent line of cases and argues that this interpretation is largely misguided. It shows that a multiple-step approach is used to reduce regulation costs and balance anti-competitive effects with potential efficiency gains. However, if an economic approach is now clearly implemented, competition policy is constrained by the procedural aspect of the legal process and the remedies imposed remain open for discussion.

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The length of contracts and collusion

Cited by 31 publications

References 6 publications

Competition and the single electricity market: Which lessons for Ireland?

Competition and the single electricity market: Which lessons for Ireland?

How to allocate forward contracts: The case of electricity markets

Long-term energy supply contracts in European competition policy: Fuzzy not crazy

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