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The value of information in electricity investment games

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  • Oliveira, Fernando

Abstract

In this paper we look at the assumptions behind a Cournot model of investment in electricity markets. We analyze how information influences investment, looking at the way common knowledge of marginal costs, expectations on the competitors' marginal costs, expectations on the level and duration of demand, and conjectures on the others' behavior, influence the value of a project. We expose how the results are highly dependent on the assumptions used, and how the investment Nash-Cournot game with perfect and complete information implies such a degree of coordination between players that the outcome of the game would be classified by any regulation law as collusive behavior. Furthermore, we introduce the concept of Nash Value of Complete Information. As an example we use a stylized model of investment in liberalized electricity markets.

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  • Oliveira, Fernando, 2008. "The value of information in electricity investment games," Energy Policy, Elsevier, vol. 36(7), pages 2364-2375, July.
    • Handle: RePEc:eee:enepol:v:36:y:2008:i:7:p:2364-2375
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    Cited by:

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    2. Darudi, Ali & Weigt, Hannes, 2019. "Renewable Support, Intermittency and Market Power: An Equilibrium Investment Approach," Working papers 2019/06, Faculty of Business and Economics - University of Basel.
    3. Jinchao Li & Lin Chen & Yuwei Xiang & Jinying Li & Dong Peng, 2018. "Influencing Factors and Development Trend Analysis of China Electric Grid Investment Demand Based on a Panel Co-Integration Model," Sustainability, MDPI, vol. 10(1), pages 1-14, January.
    4. Filomena, Tiago Pascoal & Campos-Náñez, Enrique & Duffey, Michael Robert, 2014. "Technology selection and capacity investment under uncertainty," European Journal of Operational Research, Elsevier, vol. 232(1), pages 125-136.
    5. N. Gülpınar & F. Oliveira, 2014. "Analysis of relationship between forward and spot markets in oligopolies under demand and cost uncertainties," Computational Management Science, Springer, vol. 11(3), pages 267-283, July.
    6. Baringo, L. & Conejo, A.J., 2011. "Wind power investment within a market environment," Applied Energy, Elsevier, vol. 88(9), pages 3239-3247.

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