
Abstract
Prices may di er between regional markets if transport capacities are limited. We develop a new approach to determine to which extent such di erences stem from limited participation in cross-border trader rather than from bottlenecks. We derive a theoretical integration benchmark for the typical case where transportation markets clear before the product markets, using Grossman's (1976) notion of a rational expectations equilibrium. We compare the benchmark to data from European electricity markets. The data reject the integration hypothesis: Capacity prices contain too little information about spot price di erential; this indicates that well informed traders do not engage in cross-border trade.
Item Type: | Paper |
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Keywords: | Market integration, electricity markets, interconnector,competition policy, rational expectations equilibrium |
Faculties: | Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > A4 - Unvollständige Verträge, Marktinteraktion und soziale Vergleichsprozesse Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > B3 - Unternehmenskontrolle, Unternehmensfinanzierung und Effizienz |
Subjects: | 300 Social sciences > 330 Economics |
JEL Classification: | G14, D84, L94 |
URN: | urn:nbn:de:bvb:19-epub-13316-5 |
Language: | English |
Item ID: | 13316 |
Date Deposited: | 10. Jul 2012, 13:08 |
Last Modified: | 04. Nov 2020, 12:53 |