On Optimal Scarcity Prices

Beitrag in einer Fachzeitschrift


Details zur Publikation

Autorinnen und Autoren: Zöttl G
Zeitschrift: International Journal of Industrial Organization
Verlag: Elsevier
Jahr der Veröffentlichung: 2011
Band: 29
Heftnummer: 5
Seitenbereich: 589-605
ISSN: 0167-7187


Abstract


This article contributes to the debate of missing money (compare Joskow(2007a)). This debate has seriously questioned the desirability of limiting scarcity prices in markets with fluctuating demand by emphasizing their potentially negative impact on firms' investment decisions in the long run. A prominent example are recently liberalized electricity markets, where competition authorities have imposed price caps3 or adopted other measures to mitigate high scarcity prices. The impact of reduced scarcity prices in the long run still is only incompletely explored. We thus analyze investment of firms in base load and peak load technologies in a market with fluctuating demand under imperfect competition. We show that an appropriately chosen limitation of scarcity prices is not only beneficial in the short run but also in the long run. It leads to a strict increase of investment in peak load technologies, leaving investment in base load technologies unchanged. Furthermore, we characterize the optimal limit on scarcity prices.



FAU-Autorinnen und Autoren / FAU-Herausgeberinnen und Herausgeber

Zöttl, Gregor Prof. Dr.
Professur für Volkswirtschaftslehre


Zitierweisen

APA:
Zöttl, G. (2011). On Optimal Scarcity Prices. International Journal of Industrial Organization, 29(5), 589-605.

MLA:
Zöttl, Gregor. "On Optimal Scarcity Prices." International Journal of Industrial Organization 29.5 (2011): 589-605.

BibTeX: 

Zuletzt aktualisiert 2018-09-08 um 18:38