Abstract

AMALFI GONZALEZ, Alex. Business strategy for electricity retail merchandising and its effects on consumers. Cuad. Adm. [online]. 2007, vol.20, n.34, pp.299-329. ISSN 0120-3592.

Electricity retail merchandising was a regulated monopoly but market liberalization trends have also reached public utilities, making it relevant to analyze the price effects that such an interaction among competing firms will generate. To do so, this article theoretically seeks a framework to enable explaining the strategic behavior that the firms participating in electricity retail merchandising activities will adopt. After identifying a limited set of possible strategic business organization alternatives, an extensive game model is built, which allows identifying the optimum behavior that the companies will adopt, taking into account the optimum conduct of all other stakeholders. An analysis of efficient business decisions is also proposed, considering the possibilities available in the game regarding the business organization, the decision to keep competitive or to get out of the game, and the possibility of acquiring the competing firms. The model contributes evidence that the game may provide improved general welfare for the society, but it will always do so first for high-income bracket consumers and against low-income bracket consumers.

Keywords : Electricity merchandizing; strategic behavior; extensive games; entry and exit of companies; price breakdown.

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