Optimal Willingness to Supply Wholesale Electricity Under Asymmetric Linearized Marginal Costs
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AbstractThis 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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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://www.econjournals.com/index.php/ijeep/article/view/261