- Competition with forward contracts: a laboratory analysis motivated by electricity market design
- Economic Journal
- Volume | Issue number
- 118 | 525
- Number of pages
- Document type
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
We use experiments to study the efficiency effects of adding the possibility of forward contracting to a spot market. We focus on the strategic implications of a forward market and consider both quantity and supply function competition. In both cases we compare the effect of adding a contract market to the introduction of an additional competitor. We find that, as theory suggests, for both types of competition the introduction of a forward market significantly lowers prices. The combination of supply function competition with a forward market leads to high efficiency levels.
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