A fresh look on verti-zontally differentiated peer-to-peer electricity trading platforms with and without service customization

Abstract

We analyze a two-sided market where two platforms compete in electricity intraday trading. These intermediaries are differentiated both vertically and horizontally and engage in price competition to attract agents from both sides of the market, buyers and sellers. Alongside accounting for quality disparities at the intermediary level, we consider the possibility that platforms may choose to customize electricity intraday trading services. Main results demonstrate that equilibrium outcomes depend on the interaction between the strength of indirect network externalities and the degree of quality differentiation between platforms when service customization is absent. Notably, regardless of whether horizontal or vertical dominance prevails, the intensity of indirect network externalities consistently fosters pro-competitive effects in the private equilibrium. Conversely, when platforms opt for service customization, indirect network externalities do not influence equilibrium access prices and profits if the quality discrepancy between platforms is sufficiently high. This suggests that pro-competitive effects vanish under this specific circumstance. Consequently, this research emphasizes the critical role of service customization in peer-to-peer electricity intraday trading systems. If overlooked by regulators, the surplus enjoyed by incumbent operators at the distribution level, typically attributed to natural monopolies, may be transferred to high-quality platforms that customize services.