Market Structure and the Price of Electricity: An ex ante Analysis of the deregulated Swedish Electricity Market

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Abstract
Following new legislation the Swedish electricity market is about to be deregulated. The new system is designed to ensure competition in production and supply. The Swedish electricity market is characterised by a high degree of concentration on the seller side. In this paper we use a simple numerical model to explore the relation between the Cournot-equilibrium price and the number of firms and the size distribution of firms on the market. We show that given the current structure of firms on the supply side of the Swedish electricity market, deregulation is not a sufficient condition for equilibrium prices close to marginal costs.
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