Ownership and Collusive Exit: Theory and a Case of Nuclear Phase-out

Research output: Working paperScientific

Abstract

In a declining market each firm hopes others will exit first. Collusive crossownership removes this war of attrition: it achieves subgame-perfect collusive exit by giving a stake in the gains that follow from one’s exit and by taking a stake in one’s continuation gains. We show the result and apply it to the electricity sector where new technologies force incumbents to phase out capacity. An illustrative quantification for the Nordic nuclear industry shows how equity arrangements lead to a highly distorted phase-out, both for the consumer surplus and environment.
Original languageEnglish
Publication statusPublished - 2018
MoE publication typeD4 Published development or research report or study

Publication series

NameMIT CEEPR Working Paper Series
PublisherMIT Center for Energy and Environmental Policy Research

Keywords

  • Cross-ownership
  • Exit
  • War of Attrition
  • Electricity
  • Renewable Energy
  • Stranded Assets

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