An Auction Story: How Simple Bids Struggle with Uncertainty

Jörn C. Richstein, Casimir Lorenz and Karsten Neuhoff ()

No 1765, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: Short-term electricity markets are key to an efficient production by generation units. We develop a two-period model to assess different bidding formats to determine for each bidding format the optimal bidding strategy of competitive generators facing price-uncertainty. We compare the results for simple bidding, block bidding and multi-part bidding and find that even under optimal simple and block bidding generators face the risk of ex-post suboptimal solutions, whereas in multi-part bidding these do not occur. This points to efficiency gains of multi-part bidding in the presence of uncertainty in electricity markets.

Keywords: market design; electricity markets; bidding formats; auctions (search for similar items in EconPapers)
JEL-codes: D44 D47 L94 Q48 (search for similar items in EconPapers)
Pages: 30 p.
Date: 2018
New Economics Papers: this item is included in nep-des, nep-ene, nep-gth and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://www.diw.de/documents/publikationen/73/diw_01.c.603807.de/dp1765.pdf (application/pdf)

Related works:
Journal Article: An auction story: How simple bids struggle with uncertainty (2020)
Journal Article: An auction story: How simple bids struggle with uncertainty (2020)
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