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Market Efficiency, Competition, and Communication in Electric Power Markets: Experimental Results

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  • Chapman, Duane
  • Vossler, Christian A.
  • Mount, Timothy D.
  • Barboni, V.
  • Thomas, Robert J.
  • Zimmerman, Ray D.

Abstract

Economic theory gives no clear indication of the minimum number of producers necessary for a market to define competitive price-quantity equilibria which approximate price equal to marginal cost. Previous work and FERC Guidelines generally suggest that 6 to 10 generators may be workably competitive. Our experiments with PowerWeb suggest that a higher number of suppliers may be necessary to approximate competitive market solutions, this in the absence of any communication among producers. As communications rules are altered to parallel differing types of antitrust enforcement, market results with 24 participants approach pure monopoly values.

Suggested Citation

  • Chapman, Duane & Vossler, Christian A. & Mount, Timothy D. & Barboni, V. & Thomas, Robert J. & Zimmerman, Ray D., 2002. "Market Efficiency, Competition, and Communication in Electric Power Markets: Experimental Results," Working Papers 127315, Cornell University, Department of Applied Economics and Management.
    • Handle: RePEc:ags:cudawp:127315
    DOI: 10.22004/ag.econ.127315
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    Cited by:

    1. Christian Vossler & Timothy Mount & Robert Thomas & Ray Zimmerman, 2009. "An experimental investigation of soft price caps in uniform price auction markets for wholesale electricity," Journal of Regulatory Economics, Springer, vol. 36(1), pages 44-59, August.

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