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Hedging and vertical integration in electricity markets / René Aïd in Management science, Vol. 57 N° 8 (Août 2011) 

Public ISBD [article]  in Management science > Vol. 57 N° 8 (Août 2011) . - pp. 1438-1452 Titre : Hedging and vertical integration in electricity markets Type de document : texte imprimé Auteurs : René Aïd, Auteur ; Gilles Chemla, Auteur ; Arnaud Porchet, Auteur Année de publication : 2011 Article en page(s) : pp. 1438-1452 Note générale : Management Langues : Anglais (eng) Mots-clés : Corporate  finance  Industries  Electric–electronic  Financial  institutions  Markets  Asset  pricing Index. décimale : 658 Organisation des entreprises. Techniques du commerce Résumé : This paper analyzes the interactions between competitive (wholesale) spot, retail, and forward markets and vertical integration in electricity markets. We develop an equilibrium model with producers, retailers, and traders to study and quantify the impact of forward markets and vertical integration on prices, risk premia, and retail market shares. We point out that forward hedging and vertical integration are two separate mechanisms for demand and spot price risk diversification that both reduce the retail price and increase retail market shares. We show that they differ in their impact on prices and firms' utility because of the asymmetry between production and retail segments. Vertical integration restores the symmetry between producers' and retailers' exposure to demand risk, whereas linear forward contracts do not. Vertical integration is superior to forward hedging when retailers are highly risk averse. We illustrate our analysis with data from the French electricity market. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/57/8.toc [article] Hedging and vertical integration in electricity markets [texte imprimé] / René Aïd, Auteur ; Gilles Chemla, Auteur ; Arnaud Porchet, Auteur . - 2011 . - pp. 1438-1452. Management Langues : Anglais (eng) in Management science > Vol. 57 N° 8 (Août 2011) . - pp. 1438-1452 Mots-clés : Corporate  finance  Industries  Electric–electronic  Financial  institutions  Markets  Asset  pricing Index. décimale : 658 Organisation des entreprises. Techniques du commerce Résumé : This paper analyzes the interactions between competitive (wholesale) spot, retail, and forward markets and vertical integration in electricity markets. We develop an equilibrium model with producers, retailers, and traders to study and quantify the impact of forward markets and vertical integration on prices, risk premia, and retail market shares. We point out that forward hedging and vertical integration are two separate mechanisms for demand and spot price risk diversification that both reduce the retail price and increase retail market shares. We show that they differ in their impact on prices and firms' utility because of the asymmetry between production and retail segments. Vertical integration restores the symmetry between producers' and retailers' exposure to demand risk, whereas linear forward contracts do not. Vertical integration is superior to forward hedging when retailers are highly risk averse. We illustrate our analysis with data from the French electricity market. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/57/8.toc