An experimental analysis of the effects of automated mitigation procedures on investment and prices in wholesale electricity markets

Lynne Kiesling*, Bart J. Wilson

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

9 Scopus citations

Abstract

In this paper we report the findings of an economic experiment that examines the effects of an automated mitigation procedure (AMP) on prices and capacity investment choices of suppliers in a wholesale electricity market. Specifically, we examine the effects of different market power incentives on markets with and without an AMP. While we find that the AMP does not affect overall investment in capacity, the most significant determinant of long-run prices is investment in new capacity. The AMP also does not reduce long-run prices relative to markets without an AMP. Furthermore, our participants successfully manipulated the AMP's trigger price.

Original languageEnglish (US)
Pages (from-to)313-334
Number of pages22
JournalJournal of Regulatory Economics
Volume31
Issue number3
DOIs
StatePublished - Jun 2007

Keywords

  • Automated mitigation procedures
  • Electric power markets
  • Investment
  • Price caps

ASJC Scopus subject areas

  • Economics and Econometrics

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