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Supply Function Equilibrium with Asymmetric Capacities and Constant Marginal Costs
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
2007 (English)In: Energy Journal, ISSN 0195-6574, E-ISSN 1944-9089, Vol. 28, no 2, 55-82 p.Article in journal (Refereed) Published
Abstract [en]

This paper analytically derives a Supply Function Equilibrium (SFE) of a real-time electricity market with multiple firms and asymmetric production capacities. There is a unique SFE, which is piece-wise symmetric when firms have identical constant marginal costs. It is believed that some of the properties of the derived SFE are valid for real-time markets in general. Firms’ capacity constraints bind at different prices (i). Still, firms with non-binding capacity constraints have smooth residual demand (ii). Approximating an asymmetric real-time market with a symmetric one, tends to overestimate mark-ups for small positive imbalances and underestimate mark-ups for large positive imbalances (iii).

Place, publisher, year, edition, pages
2007. Vol. 28, no 2, 55-82 p.
National Category
Economics and Business
URN: urn:nbn:se:uu:diva-15217ISI: 000245859100003OAI: oai:DiVA.org:uu-15217DiVA: diva2:42988
Available from: 2008-02-07 Created: 2008-02-07 Last updated: 2011-02-04Bibliographically approved

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