How to Determine whether Regional Markets are Integrated? Theory and Evidence from European Electricity Markets
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.
Year of publication: |
2008
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Authors: | Gebhardt, Georg ; Höffler, Felix |
Publisher: |
München : Sonderforschungsbereich/Transregio 15 - Governance and the Efficiency of Economic Systems (GESY) |
Subject: | Market integration | electricity markets | interconnector | competition policy | rational expectations equilibrium |
Saved in:
freely available
Series: | |
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Type of publication: | Book / Working Paper |
Type of publication (narrower categories): | Working Paper |
Language: | English |
Other identifiers: | 10.5282/ubm/epub.13316 [DOI] 788868888 [GVK] hdl:10419/93924 [Handle] RePEc:trf:wpaper:236 [RePEc] |
Classification: | G14 - Information and Market Efficiency; Event Studies ; D84 - Expectations; Speculations ; L94 - Electric Utilities |
Source: |
Persistent link: https://www.econbiz.de/10010333901