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Forecasting the Competitive Effects of Electric Power Mergers
Thu Jul 01 21:32:54 UTC 2004
Dr. Andrew Joskow
If you live in an area where you can choose your electric company,
then chances are very good that you have seen the benefits of
competition. Because competition is only beginning to flourish in these
markets, the antitrust regulators are paying close attention to mergers
and business practices that could affect the competitive dynamics and
structure of the industry.
In this chapter from Economics of Antitrust: New Issues, Questions, and Insights,
NERA Affiliated Consultant Dr. Andrew Joskow sheds light on the
economic models that antitrust agencies have applied to forecast the
competitive effects of mergers involving electric power companies. The
economic analysis can be quite sophisticated, but as Dr. Joskow
explains, the devil is in the details. For the models to be useful, they
must account for market factors that can greatly alter the utilities'
behavior, including their incentive to withhold capacity from the market
and their incentive to enter each others' markets.