A contribution of experimental economics toward characterization of the use of market power in oligopolisitc markets

Fabien Petit (1) , Yannick Phulpin (1) , Marcelo Saguan (1) , Philippe Dessante (1)

1 SUPELEC-Campus Gif

Despite the numerous researches about imperfect competition, the market power remains difficult to quantify using traditional economics methods. In this paper, we propose an experimental economics design and outline some ways of analysis of its results toward characterization of the use of market power. A simple system with two regions and a limited interconnection transfer capacity allocated by an implicit auction is studied. Depending on the experiments two or three subjects share equitably the production capacity in one region, while the production capacity is equitably shared among 5 subjects leading to a more competitive situation in the second one. In both regions, we observe a market price that is different from the theoretical results allowing a quantification of the use of market power. Results are also analyzed based on a characterization of the subjects' behaviour. Further the impact of subjects' behaviour on the market price evolution is described.

Keywords: experimental economics; market power; electricity markets; oligopolistic markets

Domains: Electric power; Economics and Finance

Fabien Petit, Yannick Phulpin, Marcelo Saguan, Philippe Dessante. A contribution of experimental economics toward characterization of the use of market power in oligopolisitc markets. IAEE European Energy Conference, Jun 2007, Florence, Italy. pp.1-12, ⟨10.1016/IAEEconf.2007.06.013⟩. ⟨hal-00204987⟩