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Strategic Behaviour, Resource Valuation and Competition in Electricity Markets

Author

Listed:
  • Miguel A. Espinosa
  • Alvaro J. Riascos Villegas

Abstract

By means of a suitable Bayesian game we study spot electricity markets from a structural point of view. We address the problem of individual and aggregate eficciency and we show how to value water from market observables. We compare the former to engineering methods and apply our methodology to Colombian spot electricity market. Our results show that big gas and small hydro plants overbid, resources are undervalued by engineering costs and aggregate costs would have been considerably smaller if agents had played optimally. Revealed costs show a substantial gain in eficciency in the Vickrey auction compared to the actual uniform auction.

Suggested Citation

  • Miguel A. Espinosa & Alvaro J. Riascos Villegas, 2010. "Strategic Behaviour, Resource Valuation and Competition in Electricity Markets," Documentos CEDE 6856, Universidad de los Andes, Facultad de Economía, CEDE.
    • Handle: RePEc:col:000089:006856
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    References listed on IDEAS

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    1. de Castro, Luciano I. & Riascos, Alvaro, 2009. "Characterization of bidding behavior in multi-unit auctions," Journal of Mathematical Economics, Elsevier, vol. 45(9-10), pages 559-575, September.
    2. Miguel Andrés Espinosa Farfán, 2009. "Una aproximación al problema de optimalidad y eficiencia en el sector eléctrico colombiano," Documentos CEDE 5402, Universidad de los Andes, Facultad de Economía, CEDE.
    3. Harry J. Paarsch & Han Hong, 2006. "An Introduction to the Structural Econometrics of Auction Data," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262162350, December.
    4. Umlauf, Steven R., 1993. "An empirical study of the Mexican Treasury bill auction," Journal of Financial Economics, Elsevier, vol. 33(3), pages 313-340, June.
    5. Catherine D. Wolfram, 1999. "Measuring Duopoly Power in the British Electricity Spot Market," American Economic Review, American Economic Association, vol. 89(4), pages 805-826, September.
    6. Luciano I. De Castro & Alvaro Riascos, 2007. "Characterization of Bidding Behavior in Multi-Unit," Documentos CEDE 4382, Universidad de los Andes, Facultad de Economía, CEDE.
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    Citations

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    Cited by:

    1. Jorge Balat & Juan E. Carranza & Juan D. Martin, 2015. "Dynamic and Strategic Behavior in Hydropower-Dominated Electricity Markets: Empirical Evidence for Colombia," Borradores de Economia 886, Banco de la Republica de Colombia.
    2. Perez, Alex & Garcia-Rendon, John J., 2021. "Integration of non-conventional renewable energy and spot price of electricity: A counterfactual analysis for Colombia," Renewable Energy, Elsevier, vol. 167(C), pages 146-161.
    3. Lewis Evans & Greame Guthrie & Andrea Lu, 2010. "A New Zealand Electricity Market Model: Assessment of the Effect of Climate Change on Electricity Production and Consumption," Working Papers 10_09, Motu Economic and Public Policy Research.
    4. Espinosa, Miguel & Forero, German & Villaneda, Felipe, 2011. "The practice of the auction theory: The Colombian case," MPRA Paper 31150, University Library of Munich, Germany.
    5. John J. García Rendón & Alex F. Pérez-Libreros, 2019. "El precio spot de la electricidad y la inclusión de energía renovable no convencional: evidencia para Colombia," Documentos de Trabajo de Valor Público 17393, Universidad EAFIT.

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    More about this item

    Keywords

    Multi-unit auctions; Oligopoly; electricity markets;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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