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Modeling the strategic trading of electricity assets

Author

Listed:
  • Fernando S. Oliveira

    (Operational Research and Systems Warwick Business School)

  • Derek W. Bunn

    (London Business School)

  • London Business School

Abstract

We analyze how strategic asset trading can be used to gain competitive advantage. In the case of electricity markets, companies seek to improve the value of their generating portfolios by acquiring, or selling, power plants. Accordingly, we derive the basic determinants of plant value, explaining how a particular productive asset may have different values for different firms. From this, we develop an evolutionary model to understand how market structure interacts with strategic asset trading to increase the competitive advantage of firms, and furthermore, how this depends upon the actual price-setting microstructure in the wholesale market itself

Suggested Citation

  • Fernando S. Oliveira & Derek W. Bunn & London Business School, 2006. "Modeling the strategic trading of electricity assets," Computing in Economics and Finance 2006 235, Society for Computational Economics.
    • Handle: RePEc:sce:scecfa:235
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Competitive advantage; computational learning; auctions; asset trading; simulation; electricity markets;
    All these keywords.

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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