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This paper considers the technical aspects and the consequences, in terms of simulation results and policy assessment, of introducing imperfect competition in a CGE model. The modifications to the standard CGE framework needed to model imperfect competition in some industries are briefly discussed. Next, the paper examines whether, how much and why, those changes may affect the qualitative output a typical simulation experiment. It is argued that technical choices made in designing the model structure may have a significant impact on the model behavior. This is especially evident when the model output of an imperfect competition closure is compared with the one of a standard closure, assuming perfect competition. As an illustration, a simulation of agricultural trade liberalization is analyzed. Results from the same simulation exercise, but produced by alternative model formulations (one standard competitive and three imperfect competition variants) are presented and discussed. It is found that having imperfect competition in a CGE model does matter in terms of simulation results. Furthermore, alternative formulations of imperfect competition typically bring about quite different findings and implications. [ABSTRACT FROM AUTHOR]

We consider three models of investments in generation capacity in restructured electricity systems that differ with respect to their underlying economic assumptions. The first model assumes a perfect, competitive equilibrium. It is very similar to the traditional capacity expansion models even if its economic interpretation is different. The second model (open-loop Cournot game) extends the Cournot model to include investments in new generation capacities. This model can be interpreted as describing investments in an oligopolistic market where capacity is simultaneously built and sold in long-term contracts when there is no spot market. The third model (closed-loop Cournot game) separates the investment and sales decision with investment in the first stage and sales in the second stage--that is, a spot market. This two-stage game corresponds to investments in merchant plants where the first-stage equilibrium problem is solved subject to equilibrium constraints. We show that despite some important differences, the open- and closed-loop games share many properties. One of the important results is that the prices and quantities produced in the closed-loop game, when the solution exists, fall between the prices and quantities in the open-loop game and the competitive equilibrium. [ABSTRACT FROM AUTHOR]