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Cross-product Manipulation in Electricity Markets, Microstructure Models and Asymmetric Information

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  • Chiara Lo Prete, William W. Hogan, Bingyuan Liu, and Jia Wang

Abstract

Electricity market manipulation enforcement actions have moved from conventional analysis of generator market power in real-time physical markets to materialallegations of sustained cross-product price manipulation in forward financial markets. A major challenge is to develop and apply forward market analyticalframeworks and models. This task is more difficult than for the real-time market. An adaptation of cross-product manipulation models from cash-settled financialmarkets provides an existence demonstration under uncertainty and asymmetric information. The implications of this analysis include strong empirical predictionsabout necessary randomized strategies that are not likely to be observed or sustainable in electricity markets. Absent these randomized strategies and othermarket imperfections, the means for achieving sustained forward market price manipulation remains unexplained.

Suggested Citation

  • Chiara Lo Prete, William W. Hogan, Bingyuan Liu, and Jia Wang, 2019. "Cross-product Manipulation in Electricity Markets, Microstructure Models and Asymmetric Information," The Energy Journal, International Association for Energy Economics, vol. 0(Number 5).
    • Handle: RePEc:aen:journl:ej40-5-loprete
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    Cited by:

    1. Benatia, David & Billette de Villemeur, Etienne, 2019. "Strategic Reneging in Sequential Imperfect Markets," MPRA Paper 105280, University Library of Munich, Germany, revised Jan 2020.
    2. Hopkins, Caroline A., 2020. "Convergence bids and market manipulation in the California electricity market," Energy Economics, Elsevier, vol. 89(C).
    3. Guo, Nongchao & Lo Prete, Chiara, 2019. "Cross-product manipulation with intertemporal constraints: An equilibrium model," Energy Policy, Elsevier, vol. 134(C).

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    JEL classification:

    • F0 - International Economics - - General

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