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Bidding behavior in the Chilean electricity market

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  • Bustos-Salvagno, Javier

Abstract

Contracts in power markets are usually obscure. From recently public auctions of long-term supply contracts we can obtain information on how contract prices are determined. To understand generators' bidding behavior, this paper examines the Chilean experience from 2006 to 2011. Using a divisible good auction model we provide a theoretical framework that explains bidding behavior in terms of expected spot prices and contracting positions. Empirical estimations indicate heterogeneity in the cost of over-contracting depending on incumbency, bringing evidence of significant barriers to entry.

Suggested Citation

  • Bustos-Salvagno, Javier, 2015. "Bidding behavior in the Chilean electricity market," Energy Economics, Elsevier, vol. 51(C), pages 288-299.
    • Handle: RePEc:eee:eneeco:v:51:y:2015:i:c:p:288-299
    DOI: 10.1016/j.eneco.2015.07.003
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    Cited by:

    1. Clements, A.E. & Hurn, A.S. & Li, Z., 2016. "Strategic bidding and rebidding in electricity markets," Energy Economics, Elsevier, vol. 59(C), pages 24-36.
    2. Natsuko Toba & Tooraj Jamasb & Luiz Maurer & Anupama Sen, 2024. "Multi-objective Auctions for Utility-Scale Solar Battery Systems: Lessons for ASEAN and East Asia," Economics, Law, and Institutions in Asia Pacific, in: Han Phoumin & Rabindra Nepal & Fukunari Kimura & Farhad Taghizadeh-Hesary (ed.), Large-Scale Development of Renewables in the ASEAN, chapter 0, pages 21-53, Springer.
    3. Manzano, Carolina & Vives, Xavier, 2021. "Market power and welfare in asymmetric divisible good auctions," Theoretical Economics, Econometric Society, vol. 16(3), July.
    4. Javier Bustos-Salvagno & Fernando Fuentes H., 2017. "Electricity Interconnection in Chile: Prices versus Costs," Energies, MDPI, vol. 10(9), pages 1-17, September.
    5. Luis E. GONZALES & ITO Koichiro & Mar REGUANT, 2022. "The Dynamic Impact of Market Integration: Evidence from renewable energy expansion in Chile," Discussion papers 22050, Research Institute of Economy, Trade and Industry (RIETI).
    6. Loi, Tian Sheng Allan & Jindal, Gautam, 2019. "Electricity market deregulation in Singapore – Initial assessment of wholesale prices," Energy Policy, Elsevier, vol. 127(C), pages 1-10.
    7. Mohammad Nure Alam, 2021. "Accessing the Effect of Renewables on the Wholesale Power Market," International Journal of Energy Economics and Policy, Econjournals, vol. 11(2), pages 341-360.

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    More about this item

    Keywords

    Auctions; Electricity; Forward contracts; Chile; Spot price; Contracting capacity; Entry;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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