Asymmetric price transmission in supply function equilibrium, carbon prices and the German electricity spot market


Wölfing, Nikolas


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URL: https://ub-madoc.bib.uni-mannheim.de/2039
URN: urn:nbn:de:bsz:180-madoc-20394
Document Type: Working paper
Year of publication: 2008
The title of a journal, publication series: ZEW Discussion Papers
Volume: 08-040
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: Q41 L13 D82 C73 ,
Subject headings (SWD): Umweltzertifikathandel , Warenbörse , Elektrizitätshandel , Auktionstheorie , Wertpapierhandel , Deutschland
Keywords (English): Asymmetric price transmission , Electricity spot markets , Emission allowances
Abstract: In January 2007, first evidence of an asymmetric pass-through of CO2 emission allowance prices was reported for the German electricity spot market. This paper explores the theoretical basis for such an asymmetry in the context of a supply function bidding duopoly. It interprets fluctuating carbon prices as a coordination mechanism for tacitly colluding firms and studies incentive compatibility in the repeated game. It is new in its attempt to model asymmetric behaviour in a spot market without relevant frictions, and gives a reasoning why the asymmetry shows up for emission allowances only. The paper concludes with a theorem: that asymmetric price transmission is sustained up to a certain maximum level which might include the monopoly solution and that this mechanism is always preferred to non-cooperation.
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Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




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Wölfing, Nikolas (2008) Asymmetric price transmission in supply function equilibrium, carbon prices and the German electricity spot market. Open Access ZEW Discussion Papers Mannheim 08-040 [Working paper]
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