experimental energy economics
Post on 19-Oct-2014
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Experimental Economics is for Market Design what Engineering is for Bridge Building. Presenting results of Van koten & Ortmann (2011, http://goo.gl/Awv68)TRANSCRIPT
![Page 1: Experimental Energy Economics](https://reader033.vdocuments.us/reader033/viewer/2022061105/54442f93afaf9fa0098b47e8/html5/thumbnails/1.jpg)
Silvester van Koten
European University Institute, FlorenceCERGE-EI, Prague
Experimental Energy
Economics
Presenting results of Van Koten, S. and Ortmann, A., 2011. “Structural versus Behavioral Remedies in the Deregulation of Electricity Markets: An Experimental Investigation Guided by Theory and Policy Concerns.”
![Page 2: Experimental Energy Economics](https://reader033.vdocuments.us/reader033/viewer/2022061105/54442f93afaf9fa0098b47e8/html5/thumbnails/2.jpg)
The job of economists
Analyze markets
Design markets
Silvester van Koten Experimental Energy Economics
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Design markets (Roth, Econometrica, 2002)
Highly practical advice
Institutional details
Bounded rationality
Silvester van Koten Experimental Energy Economics
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Theoretical economics
Engineering approach
Silvester van Koten Experimental Energy Economics
![Page 5: Experimental Energy Economics](https://reader033.vdocuments.us/reader033/viewer/2022061105/54442f93afaf9fa0098b47e8/html5/thumbnails/5.jpg)
1. Theoretical Physics
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2. Bridge model experimentation
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3. Bridge
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1. Theory 2. Engineering 3. Implementation
Silvester van Koten Experimental Energy Economics
Theoretical Physics Bridge Experimentation Bridge
Theoretical Economics Market ExperimentationExperimental &
Computational Economics
Competitive MarketE.g., Energy Market
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Market power in generator markets
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Market power in generator markets
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Structural measure of divestiture
More competitors
Cournot
More competitors -> more supply & lower prices
Silvester van Koten Experimental Energy Economics
Behavioral measure of forward market
More supply of each competitor
Allaz & Villa (1993)
Forward market -> more supply & lower prices
Remedies
1. Theory
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3 Firms
4 Firms
Without Forward Market
M3 M4
With Forward Market
M3F –
43 44
45
Theoretical predictions (following Allaz & Vila, 1993)Silvester van Koten Experimental Energy Economics
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Structural measure of divestiture
More competitors
Cournot
More competitors -> more supply & lower prices
Silvester van Koten Experimental Energy Economics
Behavioral measure of forward market
More supply of each competitor
Allaz & Villa (1993)
Forward market -> more supply & lower prices
Remedies
1. Theory
2. “Engineering”
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“Engineering”
Economics Experiment
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“Engineering”
Economics Experiment
![Page 16: Experimental Energy Economics](https://reader033.vdocuments.us/reader033/viewer/2022061105/54442f93afaf9fa0098b47e8/html5/thumbnails/16.jpg)
“Engineering”Economics ExperimentThe new state-of-the-art LEE Laboratory (www.vse-lee.cz)
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Silvester van Koten Experimental Energy Economics
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3035
4045
5055
1 4 8 12 16 20 24Period
M3_mean M3F_meanM4_mean
M3, M3F, M4
Silvester van Koten Experimental Energy Economics
Structural measure effect
(1 more competitor)
Behavioral measure effect
(Forward market) >
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Both measures have pro-competitive effects:– Behavioral: Introducing a forward market– Structural: Adding one more competitor
Design focus on BEHAVIORAL measure first– Behavioral measure MORE effective than structural
measure
Silvester van Koten Experimental Energy Economics
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Experimental Energy Economics
• Forward market versus competition*
• Abatement decisions under the Emission Trading Scheme in the EU.
• Self-Regulatory Organisations and Governmental Oversight
Silvester van Koten Experimental Energy Economics
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Questions?
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Silvester van Koten
European University Institute, FlorenceCERGE-EI, Prague
Experimental Energy
Economics
Presenting results of Van Koten, S. and Ortmann, A., 2011. “Structural versus Behavioral Remedies in the Deregulation of Electricity Markets: An Experimental Investigation Guided by Theory and Policy Concerns.”