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Price Wars and Collusion in the Spanish Electricity Market

Author

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  • Juan ToroNatalia Fabra
  • Universidad Carlos III de Madrid
Abstract
We analyze the time-series of prices in the Spanish electricity market by means of a time varying-transition-probabilities Markov Switching model. Accounting for demand and supply conditions, we show that the time-series of prices is characterized by two significantly different price levels. Based on a Green and Porter type of model that specifically introduces the rules of the bidding process, we construct several triggers for price wars. The triggers considered are statistically significant and report the predicted signs. In particular, price wars are triggered by unexpected changes in the major generators` market shares and revenues. We obtain more empirical support to Green and Porter`s model than previous studies.

Suggested Citation

  • Juan ToroNatalia Fabra & Universidad Carlos III de Madrid, 2002. "Price Wars and Collusion in the Spanish Electricity Market," Economics Series Working Papers 136, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:136
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    References listed on IDEAS

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    More about this item

    Keywords

    electricity markets; tacit collusion; Markov Switching;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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