NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Vertical Arrangements, Market Structure, and Competition An Analysis of Restructured U.S. Electricity Markets

James B. Bushnell, Erin T. Mansur, Celeste Saravia

NBER Working Paper No. 13507
Issued in October 2007
NBER Program(s):   EEE   IO

This paper examines vertical arrangements in electricity markets. Vertically integrated wholesalers, or those with long-term contracts, have less incentive to raise wholesale prices when retail prices are determined beforehand. For three restructured markets, we simulate prices that define bounds on static oligopoly equilibria. Our findings suggest that vertical arrangements dramatically affect estimated market outcomes. Had regulators impeded vertical arrangements (as in California), our simulations imply vastly higher prices than observed and production inefficiencies costing over 45 percent of those production costs with vertical arrangements. We conclude that horizontal market structure accurately predicts market performance only when accounting for vertical structure.

download in pdf format
   (912 K)

email paper

This paper is available as PDF (912 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w13507

Published: James B. Bushnell & Erin T. Mansur & Celeste Saravia, 2008. "Vertical Arrangements, Market Structure, and Competition: An Analysis of Restructured US Electricity Markets," American Economic Review, American Economic Association, vol. 98(1), pages 237-66, March. citation courtesy of

Users who downloaded this paper also downloaded these:
Wolak and Patrick w8248 The Impact of Market Rules and Market Structure on the Price Determination Process in the England and Wales Electricity Market
Wolak Market Design and Price Behavior in Restructured Electricity Markets: An International Comparison
Mansur w13509 Measuring Welfare in Restructured Electricity Markets
Joskow and Tirole w10472 Reliability and Competitive Electricity Markets
Wolak Regulating Competition in Wholesale Electricity Supply
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us