An experimental analysis of the effects of automated mitigation procedures on investment and prices in wholesale electricity markets |
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Authors: | Lynne Kiesling Bart J Wilson |
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Institution: | (1) Department of Economics, Northwestern University, 2001 Sheridan Road, Evanston, 60208, IL, USA;(2) Interdisciplinary Center for Economic Science, George Mason University, 4400 University Drive, MSN IB2, Fairfax, 22030-4444, VA, USA |
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Abstract: | In this paper we report the findings of an economic experiment that examines the effects of an automated mitigation procedure
(AMP) on prices and capacity investment choices of suppliers in a wholesale electricity market. Specifically, we examine the
effects of different market power incentives on markets with and without an AMP. While we find that the AMP does not affect
overall investment in capacity, the most significant determinant of long-run prices is investment in new capacity. The AMP
also does not reduce long-run prices relative to markets without an AMP. Furthermore, our participants successfully manipulated
the AMP’s trigger price.
The data and a sample copy of the instructions are available upon request. This article reflects the opinions of the authors
and does not necessarily reflect the position of the Federal Energy Regulatory Commission or any individual Commissioner. |
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Keywords: | Electric power markets Automated mitigation procedures investment Price caps |
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