Market Incentive Index for Studying Equilibrium Between Vertically Linked Oligopolistic Electricity

A new index,called the market incentive index is proposed for studying the equilibrium between fuel and electricity markets.Firstly,a game theoretic model with a monopolistic upstream fuel market and an oligopolistic downstream electricity market is introduced.It is a simple model that can represent strategic interactions between the two vertically linked markets.Secondly,the market equilibrium is studied for deriving out the index,in which interaction relationships between the two markets are explained analytically with three lemmas and demonstrated with numerical examples.Based on the three preceding lemmas,the market equilibrium is further studied by the index.The study shows that,even for the very complicated interactions between fuel producers and electricity producers,some insights on the market equilibrium can be developed with the index.The index-based method can be used as a very intuitionistic way to study the impact of fuel price on the market equilibrium.Thus,it is a new useful method for analysis of strategic behaviors in the equilibrium.