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Capacity choice, technology mix and market power

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  • Meunier, Guy

Abstract

This paper investigates strategic capacity choices in electricity markets comprised of heterogeneous firms. Long term strategic investments are analyzed assuming that the wholesale market is competitive. There are two technologies available to produce electricity; both are efficient and used at a first best optimum. When not all firms can invest in both technologies, there can be over investment in either of these technologies. It is shown that if the number of firms that can invest in a particular technology is limited, the development of competition solely using the other technology can decrease welfare.

Suggested Citation

  • Meunier, Guy, 2010. "Capacity choice, technology mix and market power," Energy Economics, Elsevier, vol. 32(6), pages 1306-1315, November.
    • Handle: RePEc:eee:eneeco:v:32:y:2010:i:6:p:1306-1315
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    Cited by:

    1. Michael Pahle & Kai Lessmann & Ottmar Edenhofer & Nico Bauer, 2013. "Investments in Imperfect Power Markets under Carbon Pricing: A Case Study Based Analysis," The Energy Journal, , vol. 34(4), pages 199-228, October.
    2. Guy Meunier, 2014. "Risk Aversion and Technology Portfolios," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(4), pages 347-365, June.
    3. Bichuch, Maxim & Hobbs, Benjamin F. & Song, Xinyue, 2023. "Identifying optimal capacity expansion and differentiated capacity payments under risk aversion and market power: A financial Stackelberg game approach," Energy Economics, Elsevier, vol. 120(C).

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