This paper examines the market for wholesale supplies of electricity in Italy to determine if the generators are able to exercise market power. For a specific bid function and marginal cost function there is a portfolio of forward financial contracts that can rationalize that bid function as expected profit maximizing. Generation unit owner’s contract position affects the unit bid behavior in the spot electricity market (Wolak 2000, 2001). Following Wolak (2000, 2001 and 2003) we use the best response price concept in order to derive estimates of the cost function for a bidder in a competitive electricity market using actual bid information, the bid hedge contact position and the actual market outcomes.

ESTIMATING COST FUNCTION USING OBSERVED BID DATA IN WHOLESALE ELECTRICITY ITALIAN MARKET

BOLLINO, Carlo Andrea;POLINORI, Paolo
2009

Abstract

This paper examines the market for wholesale supplies of electricity in Italy to determine if the generators are able to exercise market power. For a specific bid function and marginal cost function there is a portfolio of forward financial contracts that can rationalize that bid function as expected profit maximizing. Generation unit owner’s contract position affects the unit bid behavior in the spot electricity market (Wolak 2000, 2001). Following Wolak (2000, 2001 and 2003) we use the best response price concept in order to derive estimates of the cost function for a bidder in a competitive electricity market using actual bid information, the bid hedge contact position and the actual market outcomes.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11391/925732
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