Review of Industrial Organization 21: 329–333, 2002. © 2002 Kluwer Academic Publishers. Printed in the Netherlands. Book Review Pricing in Competitive Electricity Markets, A. Faruqui and K. Eakin, editors. For- ward by J. Robert Malko. Boston: Kluwer Academic Publishers, 2000, xxxiii, 450 pages. ISBN 0-7923-7839-3. Pricing in Competitive Electricity Markets examines two questions. First, what will the deregulated industry look like? Generation and retailing may be deregulated, but monopoly and regulation will remain for transmission and distribution. Second, what products will emerge in the new structure? Price competition on a homogen- eous good characterized by high ﬁxed cost and low marginal cost means losses for all ﬁrms. Hence, product differentiation emerges, through pricing, power quality, or ancillary services. Authors from various backgrounds address these questions in 27 chapters over six sections. Section highlights and comments follow. Section I overviews deregulation and the emerging product differentiation. Retail competition focuses initially on price, resulting in widespread losses. Proﬁt recovers with consolidation and product differentiation. The limited ability to differentiate electricity per se forces competition along other dimensions, the most immediate is price. This ranges from a guaranteed price (e.g., ﬂat or time- of-use), where the energy provider bears the risk, to
Review of Industrial Organization – Springer Journals
Published: Oct 13, 2004
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