2020
DOI: 10.1016/j.eneco.2019.104649
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Abstract: The incentive of an electricity generating firm with market power to influence the market price depends strongly on the volume the firm has pre-sold in the forward, or hedge, markets. However, the choice of hedge level may be a strategic decision in itself. In the normal case where participants in the hedge market cannot observe the hedge position of dominant generators, we show that the optimal choice of hedging for a dominant generator facing a linear demand curve is an all-or-nothing decision and there is n…

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