• The Transactions of The Korean Institute of Electrical Engineers
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• v.66 no.1
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• pp.16-22
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• 2017

In order to reduce costs of electricity energy at periods of peak demand, there has been an exponential interest in Demand Response (DR). This paper discusses the effect on the participants' behavior in response to DR. Under the assumption of perfect competition, the equilibrium point of the electricity market with DR is derived by modeling a DR curve, which is suitable for microeconomic analysis. Cournot model is used to analyze the electricity market of imperfect competition that includes strategic behavior of the generation companies. Strategic behavior with DR makes it harder to compute equilibrium point due to the non-differential function of payoff distribution. This paper presents a solution method for achieving the equilibrium point using the best response function of the strategic players. The effect of DR on the electricity market is illustrated using a test system.

• The Transactions of the Korean Institute of Electrical Engineers A
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• v.51 no.8
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• pp.403-408
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• 2002

As the electricity industry undergoes a process of fundamental restructuring, horizontal market power appears as a potential obstacle to a fully competitive wholesale electricity market. Market power is the ability profitably to maintain prices above competitive levels by restricting output below competitive levels. In models for imperfect competition under the consideration of the transmission constraints, the Nash equilibrium has the form of a mixed strategy. In this paper, the models for analyzing imperfect competition are compared using the solution of pure and mixed equilibria. The relation between market power and the capacity of a transmission line is investigated by imperfect competition analysis methods: Cournot, Bertrand, and Supply Curve model.

• Journal of Korea Trade
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• v.24 no.2
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• pp.53-67
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• 2020

Purpose - The purpose of this paper is to study strategic trade policies under international process research and development (R&D) competition with or without market leaders for free trade and a subsidy regime and compare the effects of R&D subsidies and export subsidies on the equilibrium levels of firm profit and social welfare. Design/methodology - For the analysis, we use previous work by Haaland and Kind (2008) and construct a differentiated goods duopoly model, wherein two firms compete via quantity in a third-country market for free trade and the subsidy regime. We consider simultaneous-move quantity competition when the two firms choose their quantities simultaneously and sequential-move quantity competition when they choose their quantities sequentially. The results are compared to those of Balboa, Daughety and Reinganum (2004), who studied export subsidies. Findings - The following are the findings. First, the results of firm preference orderings regarding firm position from Dowrick (1986) and Balboa, Daughety and Reinganum (2004) may not hold in our model when the firms' strategies are strategic substitutes under free trade. Second, the preference rankings under Cournot competition for free trade and a subsidy regime are the same as those in the strategic trade policy of export subsidy. Third, except for the cases of too close substitutes and complements, the results of firm and government preferences regarding firm position are different from those of Balboa, Daughety and Reinganum (2004) in that Stackelberg leadership in a subsidy regime is advantageous when the goods are substitutes but is disadvantageous when the goods are complements. Moreover, the equilibrium level of firm profit is the highest in the Cournot-Nash play when the goods are substitutes in a subsidy regime. Fourth, except for the cases of too close substitutes and complements, the results of firms' and their respective governments' trade regime preferences are similar to those of Balboa, Daughety and Reinganum (2004) in that a Stackelberg leader firm and government prefer free trade if the goods are substitutes and prefer a subsidy regime if the goods are complements. Furthermore, a Stackelberg follower firm and government strongly prefer a subsidy regime to free trade. Originality/value - By analyzing the effects of R&D subsidies and export subsidies in international markets, we can find similarities and differences between them in international markets.

• Journal of Korea Trade
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• v.25 no.4
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• pp.88-107
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• 2021

Purpose - Using a model that highlights Ricardian comparative advantage and Cournot competition, I derive theoretical predictions on how bilateral measures of trade intensity, specialization, and intra-industry are interrelated, and how Ricardian productivity differences affect these measures. We test the predictions using trade and production data, and confirm them. Design/methodology - A simple two-country general equilibrium model is constructed to derive theory-based bilateral indexes. We then test the relationships among them using panel data for 35 countries and 14 industries between 1996 and 2008. Findings - Bilateral trade intensity is increasing in specialization, as in the classical trade theory, and in intra-industry trade, as in the new trade theory. However, productivity differences positively affect specialization, and negatively affect intra-industry trade. These effects cancel each other; thus productivity differences have little impact on trade intensity. Originality/value - This paper provides a comprehensive conceptual framework for understanding the relationship among trade intensity, specialization, intra-industry trade, and productivity differences. We derive theory-consistent measures of specialization, intra-industry trade, and productivity differences. Moreover, we reevaluate the empirical relevance of these variables for the study of gravity equations. This paper is also an effort to capture oligopolistic competition in a general equilibrium framework, interests in which recently resurged.

• KDI Journal of Economic Policy
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• v.34 no.2
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• pp.173-204
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• 2012

This study examines the equilibrium investment on the pollution abatement when firms are facing Cournot competition in the output market while the pollution permit market is perfectly competitive. Unlike standard perfect competition scenario, the abatement investment delivers an indirect effect in which it reduces other firms' equilibrium output. Consequently, compared with the socially optimal level, overinvestment arises. I also overview the potential inefficiencies that imperfect market structure induces under the emission trading scheme, presenting policy implications.

• Journal of Korea Trade
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• v.23 no.2
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• pp.46-58
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• 2019

Purpose - This paper analyzes how Research and Development (R&D) cartelization and Research Joint Ventures (RJV) affect firms that engage in Cournot competition in their product market using a model in which the Home and Foreign firm produce differentiated products and export their total output to a third country's market. Design/Methodology - In a two-stage game, research expenditures incurred in the first stage improve product quality and are subject to various degrees of spillovers. We consider four different scenarios. Findings - In a symmetric equilibrium we observe the following: (i) an RJV that cooperates in R&D decision yields the highest R&D expenditure. However, the scenario which yields the lowest expenditure depends on the extent of differentiation between the goods and the degree of spillovers; (ii) RJV cartelization yields the highest product quality, output, and consumer surplus in the third country; however, the lowest is produced by R&D competition if spillovers are strong and by R&D cartelization if spillovers are weak; and (iii) each firm's profit is at its minimum in R&D competition and its maximum in RJV cartelization. Furthermore, if spillovers are strong, the profit of each firm in R&D cartelization is greater than that in RJV competition, and vice versa. Originality/value - By analyzing product innovation in international markets, we can find similarities and differences between process R&D and product R&D in international markets.

• Korea Trade Review
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• v.41 no.2
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• pp.29-60
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• 2016

Research and Development(R&D) investment is an issue of central importance in any economy. In this paper we analyze the relationship between R&D spillovers and trade-related variables, using a two-stage model where duopolists simultaneously decide on R&D in the first stage and engage in Cournot competition in the second stage. We characterized and compared the free-trade and trade-restriction R&D equilibrium in a two-stage game of R&D investment followed by Cournot market competition. We also assessed the impact of varying the R&D spillover on the equilibrium outcomes and tariff. We showed for both free trade and protection cases that there exists a unique symmetric solution(subgame perfect Nash equilibrium). As the solution, while analytical, cannot be stated in closed form, we resorted to numerical experiments to investigate the equilibrium results. Our estimates indicate for both free trade and protection cases that the level of R&D investment and the rate of R&D expenditure decrease as the degree of R&D spillovers increases, and that there is an inverse relation between the degree of R&D spillovers and level of protection. The latter implies that the larger the degree of R&D spillovers, the lesser the level of protection.

• Journal of Electrical Engineering and Technology
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• v.2 no.4
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• pp.494-499
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• 2007

In this paper, we have investigated how transmission network constraints can be modeled in an electricity market equilibrium model. Under Cournot competition assumption, a game model is set up considering transmission line capacity constraints. Based on locational marginal pricing principle, market clearing is formulated as a total consumers# benefit maximization problem, and then converted to a conventional optimal power flow (OPF) formulation with a linearized transmission model. Using market clearing formulation, best response analysis is formulated and, finally, Nash equilibrium is formulated. In order for illustration, a numerical study for a four node system with two generating firms and two loads are presented.

• The Transactions of The Korean Institute of Electrical Engineers
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• v.56 no.7
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• pp.1199-1204
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• 2007

In a cost based pool market, the generation capacity can be used as strategic bids by generation companies (Gencos) with the cost functions open to the market. Competition using strategic capacities is modeled by Cournot and Perfect Competiton (PC) model, and transformed into two by two payoff matrix game with Gencos' decision variables of Cournot and PC model. The payoff matrices vary when capacity payments are given to Gencos in accordance with their capacity bids. Nash Equilibrium (NE) in the matrices also moves with capacity price changes. In order to maximize social welfare of the market, NE should locate in a certain position of the payoff matrices, which corresponds to a PC NE. A concept of a critical capacity price is proposed and calculated in this paper that is defined as a minimum capacity price leading to PC NE. The critical capacity price is verified to work as a tool for suppressing a strategic capacity withholding in simulations of a test system.

• Journal of Environmental Policy
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• v.14 no.4
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• pp.63-101
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• 2015

Banking and borrowing under the ETS may affect the low carbon technology investment level. If the indirect implementation measures are allowed, firms can gradually adjust their carbon reduction costs between implementation periods based on their carbon reduction costs and emission price forecasts. This implies that banking and borrowing may reduce or increase the level of low carbon technology R&D investment. In an oligopoly market, the effects of the measures are quite different from the ones in a perfectly competitive market. This is because the indirect implementation measures can shift market competition in Cournot competition model. The effects of banking and borrowing on the carbon reduction R&D investments depend on emission reduction costs, marginal production costs, discount rate, initial free allocation, and the cost reduction effects of R&D investment.