Abstract
Crampes and Moreaux [1] provide a two period model of competition between a hydrostation and a thermal station for the generation of electricity. We modify this model to make it more directly comparable with an infinite horizon model. The closed loop equilibrium is characterized.
Highlights
Crampes and Moreaux [1] (CM) provide a two period model of competition between a thermal station and a hydrostation for the production of electricity
Crampes and Moreaux [1] (CM)’s analysis is both broad and illuminating. Their model contains implicit assumptions which make it difficult to compare with an infinite horizon model
An appropriately written finite horizon model is essential to the understanding of infinite horizon models
Summary
Crampes and Moreaux [1] (CM) provide a two period model of competition between a thermal station and a hydrostation for the production of electricity. We assume that S is sufficiently large that if S1 S , the second period resource constraint can not bind in equilibrium. If neither hydro-constraint binds in period 2, S2 has no impact on output and It is strictly positive if q2 > 0 and a second period hydro-constraint binds.
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