Electricity Markets: Designing Auctions Where Suppliers Have Uncertain Costs

Pär Holmberg and Frank A. Wolak ()
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Frank A. Wolak: Program on Energy and Sustainable Development (PESD) and Department of Economics, Stanford University

No 1099, Working Paper Series from Research Institute of Industrial Economics

Abstract: We analyse how the market design influences the bidding behaviour in multi-unit auctions, such as wholesale electricity markets. It is shown that competition improves for increased market transparency and we identify circumstances where the auctioneer prefers uniform to discriminatory pricing. We note that political risks could significantly worsen competition in hydro-dominated markets. It would be beneficial for such markets to have clearly defined contingency plans for extreme market situations.

Keywords: cost uncertainty; asymmetric information; uniform-price auction; discriminatory pricing; Bertrand game; market transparency; wholesale electricity market; treasury auction; Bayesian Nash equilibria (search for similar items in EconPapers)
JEL-codes: C72 D43 D44 L13 L94 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2015-12-18
New Economics Papers: this item is included in nep-com, nep-ene, nep-gth and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Working Paper: Electricity markets: Designing auctions where suppliers have uncertain costs (2015)
Working Paper: Electricity markets: Designing auctions where suppliers have uncertain costs (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:1099

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