Decisions and Equilibrium

Paper Summary:

This paper studies the Nash-Cournot model, created in 1995 following the deregulation of the Swedish government's electricity market. It is a simple numerical model to explore the relationship between the Cournot-equilibrium price and the number of firms and the size distribution of firms on the market. The model shows 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. The author of this paper applies the Swedish model to the British electrical system.

From the Paper:

"In their work they 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. The model shows 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. Furthermore, they found this to be true in most nations under a Socialist type government such as Sweden's as well as capitalist nations where government regulation of the electrical market is present."

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