Abstract
This article investigates whether the Cournot model of imperfect competition holds true in the Japanese retail electricity market, using monthly data over the period 2005–2010. One of the concerns about a retail electricity market that is open to competition is the collusive behavior of some suppliers, which leads to a substantial loss of economic efficiency. A revealed preference test of the Cournot model is conducted, using market price and firm output data, as in Carvajal et al. (2013). This test enables regulators to investigate the possibility of collusive behavior among firms in the industry. The application of the revealed preference test to the retail electricity market in Japan indicates that the possibility of collusive behavior among the incumbents cannot be excluded. It also implies that market size and firm size affect the possibility of collusion.
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