The Impact of Different Unbundling Scenarios on Wholesale Prices in Energy Markets

A recent highly disputed subject of regulating energy markets in Europe is the unbundling of vertically integrated up- and downstream firms. While legal unbundling is already implemented in most countries and indisputable in its necessity for approaching regulatory aims, continuative models such as ownership unbundling are still ambiguous. The following article contributes to the economic analysis of identifying the differences of these separate types of unbundling by concentrating on competition effects and the possibility to conceal true marginal costs. Via simulation, we find that legal unbundling yields the lowest prices in a market under Cournot competition. Moreover, under Bertrand competition, no differences between legal unbundling and ownership unbundling can be identified.