Arthur Schram – AE / CREED
Pivotal Suppliers and Market Power in Experimental Supply Function Competition
Abstract of the presentation:
In the process of regulatory reform in the electricity industry, the mitigation of market power is one of the basic problems regulators have to deal with. We use experimental data to study the impact of the presence of pivotal suppliers on competition in markets with supply function competition, akin to the one in wholesale electricity markets. Demand varies within a market period. Our treatments vary the demand distribution as well as the amount and symmetry of the allocation of capacity between the firms. This allows us to isolate the impact of pivotal suppliers. We find that changes in capacity distribution and demand distribution influence market outcomes in the way predicted by the model of Genc and Reynolds (2003). The experimental results provide new evidence on equilibrium selection for supply function equilibrium models.
Information: Marcos Poplawski: M.P.Ribeiro@uva.nl