Competitive Equilibrium in the Italian Wholesale Electricity Market

Simona Bigerna, Carlo Andrea Bollino, Maria Chiara D'Errico, Paolo Polinori
2015 Social Science Research Network  
The market power analysis in electricity market is relevant for understanding the competitive development of the industry's restructuring and the liberalization process. The paper analyzes the market power exercised by power generators in the Italian wholesale electricity market. Following the approach of Wolak (2003, 2009), the extent of market power is measured using the Lerner index computed as the inverse of arc elasticity of the residual demand faced by each Cournot competitors. Then, the
more » ... etitors. Then, the market supply curves have been adjusted to entail market power effects and the new market resolutions were derived. The new equilibrium prices are the competitive ones and represent the market clearing price that would have been if the electricity market was competitive and the effects of unilateral market power were removed. JEL classification: D43
doi:10.2139/ssrn.2620643 fatcat:gq7gssufobfrlos4hsfkmkzlde