Tuesday, 24 June, 2014 | 12:00 | Defense

Sherzod Tashpulatov: “Network Industry Liberalization: The Case of the England and Wales Electricity Market”

Dissertation Committee:
Lubomír Lízal (chair)
Jan Hanousek
Peter Katuščák
Jan Kmenta



The dissertation consists of a general introduction on network industries and three chapters. The first and second chapters analyze the behavior of electricity producers at a uniform price auction. In the first chapter I examine market power manifested in submitting price bids in excess of marginal production costs. The theoretical model allows identifying the incentive and disincentive to exercise market power. Then an empirical analysis is performed at the level of producer and production unit of various input types used in electricity production. I examine how the incentive and disincentive to exercise market power change during different regulatory regime periods and draw conclusions regarding the effectiveness of regulatory reforms to improve competition.

The second chapter, which is coauthored with Lubomír Lízal, investigates another possible means of increasing prices. In particular, we examine if producers apply a capacity cutting strategy to increase prices. This strategy may be feasible when a significantly large increase in demand is forecasted so that a market operator will have to use high-cost (and sometimes even less efficient), i.e., expensive, production facilities to satisfy demand. The major purpose of this research is to analyze whether the regulatory reforms decreased the extent of strategic capacity bidding.

Generally, strategic submission of price bids or capacity bids tend to make equilibrium prices in a market more volatile. Therefore, in the third chapter, I analyze and discuss the dynamics of price level and volatility. On the one hand, the analysis of a price level is important in determining the expected revenues for producers and, in the end, costs for consumers. On the other hand, the analysis of price volatility could be important for understanding uncertainty and new entry decisions. Also, high price and low volatility levels could be interpreted as a signal of possible tacit collusion. These issues and their policy evaluation are addressed in the last chapter.

Full Text: “Network Industry Liberalization: The Case of the England and Wales Electricity Market” by Sherzod Tashpulatov