DOI:10.35833/MPCE.2023.000064 Why Marginal Pricing? Page view: 12        Net amount: 68 Author: Antonio J. Conejo Author Affiliation: the Department of Integrated Systems Engineering and the Department of Electrical and Computer Engineering,The Ohio State University, 43210, Columbus Ohio, USA Foundation: Abstract: Under perfect competition, marginal pricing results in short-term efficiency and the subsequent right short-term price signals. However, the main reason for the adoption of marginal pricing is not the above, but investment cost recovery, that is the fact that the profits obtained by infra-marginal technologies (technologies whose production cost is below the marginal price) allow them just to recover their investment costs. In addition, if the perfect competition assumption is removed, investment over-recovery or under-recovery generally occurs for infra-marginal technologies. Keywords: Electricity market ; marginal pricing ; investment cost recovery ; maximum social welfare ; right spatial and temporal price signals Received:February 04, 2023               Online Time:2023/05/23 View Full Text       Download reader