Optimal Willingness to Supply Wholesale Electricity Under Asymmetric Linearized Marginal Costs


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Authors

  • David Hudgins

Abstract

This analysis derives the profit-maximizing willingness to supply functions for single-plant and multi-plant wholesale electricity suppliers that all incur linear marginal costs. The optimal strategy must result in linear residual demand functions in the absence of capacity constraints. This necessarily leads to a linear pricing rule structure that can be used by firm managers to construct their offer curves and to serve as a benchmark to evaluate firm profit-maximizing behavior. The procedure derives the cost functions and the residual demand curves for merged or multi-plant generators, and uses these to construct the individual generator plant offer curves for a multi-plant firm.Keywords: Wholesale Electricity; Cost; Willingness to Supply; Linear Analysis; Multi-Plant; AsymmetricJEL Classifications: D43; L11; L94

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Author Biography

David Hudgins

Department of EconomicsAssistant Professor

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Published

2012-08-16

How to Cite

Hudgins, D. (2012). Optimal Willingness to Supply Wholesale Electricity Under Asymmetric Linearized Marginal Costs. International Journal of Energy Economics and Policy, 2(4), 307–317. Retrieved from https://econjournals.com/index.php/ijeep/article/view/261

Issue

Vol. 2 No. 4 (2012)

Section

Articles

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