Market Failure or Politics? A Systematic Review of Literature on Price Spikes and a Case Study of the Regulatory Responses to Surging Electricity Prices in European Countries

We present a systematic literature review on price spikes and a case study of Europe's energy crisis of 2021-22. We discuss the causes of price spikes, outline the recommended measures to deal with them, and compare the recommended measures in the literature with those applied in practice. Our review shows that there is a discrepancy between the arguments presented in the literature and the regulatory narrative in practice. While theoretical arguments assume market efficiency as the fundamental driver of regulatory decisions, political concerns can shape regulatory measures to a great extent