European Business Schools Librarian's Group

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 47: Market Structure and the Price of Electricity: An ex ante Analysis of the deregulated Swedish Electricity Market

Lars Bergman () and Bo Andersson
Additional contact information
Lars Bergman: Dept. of Economics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Bo Andersson: Dept. of Economics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden

Abstract: Following new legislation the Swedish electricity market is about to be deregulated. The new system is designed to ensure competition in production and supply. The Swedish electricity market is characterised by a high degree of concentration on the seller side. In this paper we use a simple numerical model to explore the relation between the Cournot-equilibrium price and the number of firms and the size distribution of firms on the market. We show that given the current structure of firms on the supply side of the Swedish electricity market, deregulation is not a sufficient condition for equilibrium prices close to marginal costs.

Keywords: Oligopoly; Nash-Cournot; deregulation; electricity

JEL-codes: D43; L11; L94; Q40

15 pages, February 1995

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