The competitive role of the transmission system in price-regulated power industries |
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Authors: | M Soledad Arellano Pablo Serra |
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Affiliation: | aDepartment of Industrial Engineering, Universidad de Chile, Chile;bDepartment of Economics, Universidad de Chile, Chile |
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Abstract: | This note shows how the transmission system can enhance competition in price-regulated power industries, thus extending earlier findings reported in the literature for deregulated industries. In the context of a two-technology, price-regulated power industry, we show that the interconnection of two markets initially supplied by a different monopoly reduces market power and raises welfare. We also show that the capacity of the transmission line plays a key role in determining whether market equilibrium lies closer to competition or monopoly. |
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Keywords: | Electricity industry Transmission Competition |
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