We present a model featuring irreversible investment, economies of scale, uncertain future demand and capital prices, and a regulator who sets the firm’s output price according to the cost structure of a hypothetical replacement firm. We show that a replacement firm has a fundamental cost...

The very restrictive nature of systems of supply and demand functions that have constant elasticities is well known. The same is not true of single constant own-price elasticity demand functions. This paper points out the extremely limiting properties implied by the assumption of a single...

This paper uses a new model of a competitive electricity market to investigate the role of storage in markets dominated by hydro generation. Competition among generators leads to an endogenous shadow price of stored water, which facilitates the efficient intra-day and inter-season substitution...

This paper is the second in a symposium of papers that examine the 2009 report by Frank Wolak into the New Zealand electricity market. In this paper, we discuss the Report’s measures of the ability and incentives of generators to exercise unilateral market power. We show that the construction...

This paper is the first in a symposium of papers that examine the 2009 report by Frank Wolak into the New Zealand electricity market. The Wolak report concluded that there had been a cumulative total of $4.3b (NZD) of overcharging in the New Zealand wholesale market over a period of seven years....