Transmission capacity and market power: the effect on a dominant generation firm

Demand And Equilibrium In A Network Of Oligopolistic Markets

“…For example, it could be a demand arising because of some military actions, development of the defense material production, etc. It was shown in [7] and [9] that the active demand growing, in the presence of a group of passive consumers, also provides three phases to be observed: (i) the price kept invariable while the production goes up, (ii) the constant price with the constant production volume and hence, a deficit appearing, (iii) and at last, the price jumping up as the market is abandoned by the passive consumers, and only the active demand is satisfied thereafter.…”

“…An interesting phenomenon was also mentioned in [7] and [9]: with both the first and the second type of the demand structure variations, the process is not invertible completely. For example, if the leap in price is followed by the active demand going down, then the price does not return to the initial level unless the active demand becomes lower than the initial one!…”

“…So when the active demand increases the market price should grow up. It is the growth of the active demand component that is the second type of the demand structure variations examined in [7] and [9]. The active component may reflect both an agitating demand and the demand related to some needs outside the model.…”

“…Nevertheless, one can assume that it is more natural to observe the market price instead of the aggregate output, and hence estimate each agent's influence upon the price. Such an approach is developed in papers [7] and [9], which allowed to relax the conditions imposed on the demand function and keep on in essence only one of them, namely its being non-increasing when the price increases. A technical condition for the latter function of being piecewise smooth is also kept valid.…”

“…In such a framework in [7] and [9], the equilibrium existence was established, and certain consequences of the demand structure variations were examined. Namely, two types of variations were illustrated.…”