Financial support by the European Union through the TMR research network ENDEAR (FMRX-CT98-0238) and the Spanish Ministerio de Ciencia y Tecnología (SEC2002-01352) is gratefully acknowledged. We thank Ed Kahn, Tanga McDaniel, Steve Rassenti, Robert Wilson, participants at the Seventh Annual Power Conference in Berkeley and at the ESA Conference in Strasbourg for helpful comments. Suggestions by Leonardo Felli and two anonymous referees have helped us to substantially improve this article.
1468-0297/asset/olbannerleft.gif?v=1&s=1af3b26d7b3c49289a4d2ffedc5d9b29e681ebe0)
1468-0297/asset/ecoj_centre.gif?v=1&s=011eaeeafeffba596483ec623ce4b679dbe5c83f)
1468-0297/asset/ecoj_right.gif?v=1&s=af2049451bcddd5018e9fd2c36fddf34bc9e0a5c)
Competition with forward contracts: a laboratory analysis motivated by electricity market design†
Article first published online: 20 DEC 2007
DOI: 10.1111/j.1468-0297.2007.02109.x
Additional Information
How to Cite
Brandts, J., Pezanis-Christou, P. and Schram, A. (2008), Competition with forward contracts: a laboratory analysis motivated by electricity market design. The Economic Journal, 118: 192–214. doi: 10.1111/j.1468-0297.2007.02109.x
- †
Publication History
- Issue published online: 20 DEC 2007
- Article first published online: 20 DEC 2007
- Submitted: 13 July 2004 Accepted: 6 August 2006
- Abstract
- Article
- References
- Cited By
We use experiments to study the efficiency effects of adding the possibility of forward contracting to a spot market. We focus on the strategic implications of a forward market and consider both quantity and supply function competition. In both cases we compare the effect of adding a contract market to the introduction of an additional competitor. We find that, as theory suggests, for both types of competition the introduction of a forward market significantly lowers prices. The combination of supply function competition with a forward market leads to high efficiency levels.