TY  - JOUR
AU  - Bushnell,James B.
AU  - Mansur,Erin T.
AU  - Saravia,Celeste
TI  - Vertical Arrangements, Market Structure, and Competition An Analysis of Restructured U.S. Electricity Markets
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13507
PY  - 2007
Y2  - October 2007
UR  - http://www.nber.org/papers/w13507
L1  - http://www.nber.org/papers/w13507.pdf
N1  - Author contact info:
James B. Bushnell
Department of Economics
One Shields Ave.
University of California, Davis
Davis, CA 95168
Tel: 530/752-3129
E-Mail: jbbushnell@ucdavis.edu

Erin T. Mansur
Dartmouth College
6106 Rockefeller Hall
Hanover, NH 03755
Tel: (603) 646-2531
Fax: (603) 646-2122
E-Mail: erin.mansur@dartmouth.edu

Celeste C. Saravia
E-Mail: csaravia@cornerstone.com
AB  - 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.
ER  -