Legal unbundling and auctions in vertically integrated (utilities) markets

نویسنده

  • Silvester van Koten
چکیده

This paper addresses the effectiveness of auctions and legal unbundling as regulatory measures to tender a vertically integrated industry more competitive. Specifically, I analyze if implementing auctions and legal unbundling can counter market power in an industry where a Vertically Integrated Corporation (VIC) has a monopoly position in an essential, scarce upstream activity and also owns one of the firms active in the competitive downstream activity. In an earlier paper, Van Koten (2011), I showed that in this configuration the VIC, by having its downstream firm bid more aggressively, can—through increased auction revenue—increase its profit, while disadvantaging downstream competitors and lowering efficiency. Here I analyze the regulatory measure of also legally separating the downstream firm from the VIC. I show that such a measure may only be partially effective; the VIC can formulate a simple compensation scheme that does not violate restrictions typically imposed by legal separation but induces the manager of the VIC-owned downstream firm to bid more aggressively. This increases the profits of the VIC, decreases efficiency, and disadvantages downstream competitors.

برای دانلود متن کامل این مقاله و بیش از 32 میلیون مقاله دیگر ابتدا ثبت نام کنید

ثبت نام

اگر عضو سایت هستید لطفا وارد حساب کاربری خود شوید

منابع مشابه

Growth strategies of incumbent utilities as contextually embedded: Examples from Denmark, Germany, Finland and Spain

In this article changes in the electricity industries of four different countries are analyzed in terms of the incumbent utilities’ growth strategies. The economic activities are analyzed as socially embedded as we analyze how the social context influences these strategies. A typology for analyzing growth strategies based on the relative strength of social ties and focus on markets is presented...

متن کامل

A revenue equivalence theorem for electricity auctions

The purpose of this paper is to analyze the real–time trading of electricity. We address a model for an auction–like trading which captures key features of the real–world electricity markets. Our main result establishes that, under certain conditions, the expected total payment to the electricity producers is independent on particular auction type. This result is analogous to the revenue equiva...

متن کامل

Improving Competition in European Energy Markets Through Effective Unbundling

This Article is structured as follows: first, it summarizes the European approach to developing integrated and well-functioning electricity and gas markets, giving an overview of the opening of energy markets through Community legislation and the development of the current unbundling regime. It puts the European approach in perspective, outlining experiences with unbundling in the United States...

متن کامل

M&As in European and North American Energy Markets: Implications for the Assessment of Legal and Ownership Unbundling An Event Study Analysis

Competition and antitrust law aims to prevent companies from engaging in anti-competitive behavior and to promote and protect market competition. In this context, mergers and acquisitions are under particular scrutiny, since they are often assumed to be motivated by possible market power increases, thus adversely affecting market efficiency. With a view to recent efforts within the European Uni...

متن کامل

Regulatory Objectives and the Intensity of Unbundling in Electricity Markets∗

Despite the positive effect electricity grids separated from generation and supply by ownership are expected to have on the level of competition in the non-network activities, several EU member states still adhere to a solely legally unbundled transmission grid. This choice might be induced by regulators focusing on objectives other than the promotion of consumer interests: theoretically analyz...

متن کامل

ذخیره در منابع من


  با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید

برای دانلود متن کامل این مقاله و بیش از 32 میلیون مقاله دیگر ابتدا ثبت نام کنید

ثبت نام

اگر عضو سایت هستید لطفا وارد حساب کاربری خود شوید

عنوان ژورنال:

دوره   شماره 

صفحات  -

تاریخ انتشار 2011