Although there are mechanisms to control market power in the spot market, withholding investments can still increase profits and hamper adequate capacity expansion. We examine the effect on investment of one suggested approach to reducing market power, contracting longer term. We construct a...

This paper analyzes the properties of three capacity games in an oligopolistic market with Cournot players. In the first game, capacity and the operation of that capacity is determined simultaneously. This is the classic open-loop Cournot game. In the second game capacity is decided in the first...

The Cournot model makes assumptions about the knowledge of the players, which can lead to counterintuitive results when extending the basic model. Closed-loop equilibria and models with consistent conjectural variations are problematic in that they reduce or eliminate economic rents while the...