Working Paper: CEPR ID: DP18458
Authors: Natalia Fabra; Gerard Llobet
Abstract: This paper investigates the influence of technological ownership structures on pricing strategies and productive efficiency in oligopoly. Our motivation comes from the evolving landscape of electricity markets where firms are transitioning from diversified to specialized technology portfolios, focusing either on renewable energy or fossil fuels. Our theoretical model demonstrates that diversified firms compete more vigorously than their specialized counterparts. Conversely, specialized firms exhibit higher productive efficiency but only when thermal power sources dominate.The magnitude of our theoretical predictions is assessed through simulations using data from the Spanish electricity market. Methodologically, our analysis offers novel insights for studying multi-unit auctions with cost heterogeneity and privately known capacities.
Keywords: Multiunit auctions; Private information; Electricity markets; Renewable energies
JEL Codes: L13; L94
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| competition among diversified firms (L19) | lower electricity prices (L94) |
| specialized firms (L84) | higher productive efficiency (D24) |
| diversification (G11) | lowers prices (D41) |
| specialization (Z00) | higher productive efficiency (D24) |
| renewable energy investments outgrow fossil fuel capacities (Q42) | diversified ownership structure becomes socially preferable (G34) |
| substantial renewable energy capacity (Q42) | less competitive outcomes from specialized firms (L19) |