Contestable Markets under Uncertainty

Productive Efficiency and Contestable Markets

This paper provides a new game theoretic model consistent with the premises of contestable markets. Two firms repeatedly compete for a natural monopoly position. The limit price of the incumbent is disciplined by a hit and run strategy of the entrant. In this model, contrarily to the well known Maskin and Tirole model (1988): i) productive efficiency is encouraged, the more efficient firm gets ...

Firms In Markets Under Uncertainty

We analyze a rational-expectations model of price formation in an intermediategood market under uncertainty. There is a continuum of dyads, each consisting of an upstream party and a downstream party. Both parties can make speci…c investments at private cost. As in property-rights models, di¤erent governance structures induce di¤erent investments. As in rational-expectations models, some partie...

Deregulation and the Theory of Contestable Markets

Strategic behavior in power markets under uncertainty

We consider a setting of a two settlement power market where firms compete in the forward market and an uncertain real-time market. A recourse-based framework is proposed where firms make simultaneous bids in the forward market and take recourse in the real-time market contingent on the realization of uncertainty. The market participants include both generation firms as well as the independent ...

Prices in Experimental Asset Markets under Uncertainty

This paper presents an experiment which investigates whether asset prices are affected in markets where state probabilities are not exactly known and traders have to form subjective probabilities of payoffs. Results show that the presence of vague probabilities leads to higher average prices with respect to assets characterised by known probabilities. However, prices under known and vague proba...