Abstract
In this paper we report the findings of an experiment that examines the effects of automated mitigation procedures (AMP) on capacity investment prices of suppliers in a wholesale electricity market. Specifically, in a 2 x 2 design we examine the effects of strong and weak market power incentives on markets with and without the AMP. We find that a type of soft relative offer cap does not affect overall investment in capacity. The AMP also does not reduce long-run wholesale electricity prices relative to markets in which no mitigation mechanism is in operation. The factor with the most significant effect on long-run prices is investment in new capacity.
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