Selecting Oligopolistic Models in the Italian Wholesale Electricity Market

This paper analyzes the competitive structure characterizing the Italian Day-Ahead electricity market. The market is organized according to a zone model due to limited transmission capacity. As a result different market clearing prices are defined, when the national market is split into several zones. We analyze the North and the South market to investigate which is the oligopolistic model that fits the markets better. In the North market we compare the Stackelberg and the Cournot model, whereas, in the South, the Stackelberg and the Dominant firm model. In all the models we first estimate the competitive fringe supply. Using firm-level data, we find that both markets can be described by a Stackelberg model with competitive fringe, despite the differences characterizing them. Thus, the former monopolist still holds a leader position. The analysis is applied to hourly data collected in the summer and winter months of 2005 and 2006.