I analyze secret bilateral forward contracting in a Cournot oligopoly. A secret bilateral forward contract affects the production quantities of the firms which are party to the contract but not of the outsiders. On the one hand, forward contracts facilitate for heterogeneous firms to rationalize production across facilities. On the other hand, firms also consider how forward contracting affects their combined production. I show that the spot market is less concentrated than the ownership of dispatchable facilities in the industry. Furthermore, the ownership distribution of nondispatchable facilities is irrelevant for consumer welfare. I discuss implications for policy in electricity markets.
- 511 Economics
Areas of Strength and Areas of High Potential (AoS and AoHP)
- AoS: Competition economics and service strategy - Quantitative consumer behaviour and competition economics