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.
|Publication status||Published - 2018|
|MoE publication type||D4 Published development or research report or study|
|Name||MIT CEEPR Working Paper Series|
|Publisher||MIT Center for Energy and Environmental Policy Research|
- War of Attrition
- Renewable Energy
- Stranded Assets