Groupe d’études et de recherche en analyse des décisions

G-2010-54

An Empirical Investigation of Open-Loop and Closed-Loop Equilibrium Investment Strategies in an Electricity Oligopoly Market

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In this paper, we empirically compare open-loop and closed-loop investment strategies in production capacities in the three-player Finnish electricity industry. The closed-loop equilibrium is approximated using a moving-horizon approach. Investment levels are compared first in a deterministic setting and next in a stochastic environment. The results show that the choice of information structure does not really matter when the dynamic game is deterministic, whereas it significantly affects the equilibrium strategies when the demand is uncertain.

, 19 pages