Theoretical models on electricity trading mechanism can be classified into those focusing only on the impact of bidding prices and those including both the impact of bidding prices and that of capacity availablity declarations. The latter includes not only the analysis of bidding prices as a means of exercising market power but the analysis of capacity availablity declarations as a means of strategic behavior as well. The retail competition model can save the insurance costs more relating to electricity transaction contracts, more widen the consumers' choice range, and has smaller room for agency problem compared to the wholesale competition model. on the contrary, the wholesale competition model seems to excel the retail competition model in the aspects of transaction costs and investments to expand grid capacity. The poolco model is evaluated to excel the bilateral contract model, considering the aspects of transaction costs, internalization of transmission network externalities, property rights, price signal, liquidity risk, and information. Efficiency of electricity trading depends primarily upon the industrial organization of the market and the rules governing the trading. In this context, removal of vertical connections between KEPCO and generation companies, reduction of market power, and simplification of the complex pool rules are critical for the enhancement of the efficiency of Korean electricity market.

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