Investment Incentives and Electricity Spot Market Competition

Journal article

Publication Details

Author(s): Grimm V, Zöttl G
Journal: Journal of Economics & Management Strategy
Publisher: Wiley-Blackwell
Publication year: 2013
Volume: 22
Journal issue: 4
Pages range: 832-851
ISSN: 1058-6407
Language: English


In this paper we analyze investment decisions of strategic firms that anticipate competition on

many consecutive spot markets with fluctuating (and possibly uncertain) demand.We study how

the degree of spot market competition affects investment incentives and welfare and provide an

application of the model to electricity market data. We show that more competitive spot market

prices strictly decrease investment incentives of strategic firms. The effect can be severe enough

to even offset the beneficial impact of more competitive spot markets on social welfare. Our

results obtain with and without free entry. The analysis demonstrates that investment incentives

necessarily have to be taken into account for a serious assessment of electricity spot market design.

FAU Authors / FAU Editors

Grimm, Veronika Prof. Dr.
Lehrstuhl für Volkswirtschaftslehre, insbesondere Wirtschaftstheorie
Zöttl, Gregor Prof. Dr.
Professur für Volkswirtschaftslehre

How to cite

Grimm, V., & Zöttl, G. (2013). Investment Incentives and Electricity Spot Market Competition. Journal of Economics & Management Strategy, 22(4), 832-851.

Grimm, Veronika, and Gregor Zöttl. "Investment Incentives and Electricity Spot Market Competition." Journal of Economics & Management Strategy 22.4 (2013): 832-851.


Last updated on 2018-14-07 at 22:10