Research On Discriminative Pricing Decision Equilibrium Model Of Electricity Under Oligopoly And Its Application

The market-oriented reforms has become a mainstream gradually in the world's electricity industry for the last more than ten years, the object of which is to break out the monopoly of electricity industry and introduces competition step by step into the sectors of generation and retail so as to improve the productivity of the whole industry. Because of shouldering the very important social and economical functions, however, the market-oriented reforms of Chinese electricity industry are confined in many ways and are still characterized in great degree by oligopolistic competition. Just because of this uniqueness of electricity industry, either in the foreign electricity industry operating by market or in the Chinese one transforming to market, it has become an important theoretical and practical problem for government, academic community and business circle how to make decisions on price disacrimination of electricity product in accordance with the social and economical functions of different groups of consumers so as to increase the productivity of Chinese electricity industry.Based on the reality of electricity industry and market in China, Cournot model and Stackelberg model are extended to deeply and systemitically study the decision-making on price discrimination of electricity product under the separation of electricity plant and grid with disregulation of the industry, and discriminative pricing decision equilibrum models are also bult, by which the main results in this paper are obtained as follows:First, this paper prove that the great difference in price levels is resuled from price regulation, not from the price discrimination. The monopoly pricing of the unique grid enterprise make it to pursue profit maximization at the expense of the highest electricity price and the least social welfare, which distort the efficiency of resource allocation and damage consumers'benefits. Under the situation of price regulation, if information symmetry, a set of sub-optimal prices can be found out to increase the efficiency of resource allocation and maximize the social welfare with the premise that the grid enterprise can be breakeven; if information asymmetry, however, price regulation can lead to the problems such as regulation failure, the inefficiency of the oligopolistic enterprises, the increase of regulation cost and rent-seeking, which can damage social welfare in a larger scope in turn.Second, this paper also prove that if the number of oligopoly enterprises should be controlled within the range from 3 to 5 and they should be permited to have limited pricing right, by entrance regulation of electricity market, the consumers'and electricity enterprises' social welfares and the aggregate social welfare can be improved simultanously (Pareto improvement) by price discrimination in term of periods and volumes of consumers' electricity consumption, which can not only improve the inefficiency of oligopolistic enterprises under price regulation, but also avoid the losss of the inefficiency in allocation of social resources by excessive competition.Third, this paper finds that price discrimination can be used to increase the outputs of the oligopolistic electricity enterprises, which can make average and marginal costs to decrease. As the increase of outputs can make electricity prices down, consumers'welfare will increase correspondingly. If the oligopolistic electricity enterprises can reduce the coefficients of their cost functions by improving their technology and management capabilities, the competitive advantage and profit-maximization can be available.Finally, this paper also finds that in the oligopolistic electricity market, the maximization of social welfare is reduced by the inefficiency in distribution of electricity produts when electricity demand exceeds supply; Conversely, the maximization of social welfare is reduced by the inefficiency in allocation of electricity generation when electricity supply exceeds demand.In summary, our results are not only innovative in theory and method, but can be applied to set up the price system of grid entrance and electricity distribution, to analyze the decisions on second-degree and third-degree price discrimination of electricity supply enterprises, and to help to clear the reality of electricity price system and market in China. From the perspective of application, our results have been applied in this paper to study the influence factors of electricity price system and evolution trend of the modes and structure of electricity market and to provide strong reference for formulating policies on price regulation and entrance regulation, and the proposals on reform of electricity price based on our results are of strong pertinence and operability.