Estimation of Energy Prices in Turkey in the Nash-Cournot Framework

Abstract

Increase of mass production with the industrial revolution has increased the country's dependence on energy. Even today, energy constitutes the main weight of industrialization. Especially for countries dependent on energy from abroad, energy prices are very important, and fluctuations in energy prices are decisive for the economies of these countries. Fluctuations in energy prices make the future course of energy prices important for both energy demanding countries and energy-supplying countries. There are many methods in the related literature. Our estimate of energy prices for Turkey will be based on the Nash-Cournot framework. In the Nash-Cournot framework, energy is considered as a homogeneous commodity and market equilibrium is determined by the capacity-setting decisions of the suppliers. The model indicates that competitors aim to produce more by reacting to higher prices. A fundamental offer-based stochastic model is being put forward in order to predict the energy prices and the mean price in a given period. Two ambiguous sources are addressed, these are energy producers and demand. Studies have shown that the expected number of prices increases significantly with the decrease in the number of firms in the market. Within this framework, factors determining the energy prices in Turkey will be determined and forecasts for the future will be made.