Electricity Trading in a Successive Oligopoly Market: A Social Welfare Comparison between the Generation and Retail Sectors’ Liberalization

Abstract

This study models the electricity industry as a successive Cournot oligopoly market to compare the market performance between the generation and retail sectors’ liberalization. We show that, assuming identical fixed costs on free entry into both generation and retail sectors, liberalization of the retail sector can dominate that of the generation sector with regard to social welfare.