Equilibria in two-settlement markets : market power, uncertainty, and risk aversion
- Maria Roumpani.
- [Stanford, California] : [Stanford University], 2019.
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- Roumpani, Maria, author.
- Sweeney, James L., degree supervisor.
- Kolstad, Charles D., degree committee member.
- Weyant, John P. (John Peter), degree committee member.
- Stanford University. Department of Management Science and Engineering.
- ["Forward contracting can deliver benefits in terms of risk hedging, price discovery, and market power mitigation. Aiming to advance the understanding of its role in market design, I examine how the introduction of a forward market changes the strategic and hedging incentives of participants. I challenge the two common literature assumptions of (i) one-sided market power: the assumption that only sellers exercise market power and (ii) perfect arbitrage: the equivalence of forward and (expected) spot price. I provide a framework in which oligopolists face oligopsonists in two sequential markets and allow for a price premium to arise endogenously as the result of hedging and strategic considerations. The introduction of a forward market is found to increase efficiency but does not necessarily do so in a Pareto improving way. The distribution of potential benefits to sellers and buyers depends on their risk aversion and market power. Policy implications are discussed."]
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- Submitted to the Department of Management Science and Engineering.
- Thesis Ph.D. Stanford University 2019.