Numerical Calculation of an Asymmetric Supply Function Equilibrium with Capacity Constraints

Pär Holmberg

No 2005:12, Working Paper Series from Uppsala University, Department of Economics

Abstract: Producers submit committed supply functions to a procurement auction, e.g. an electricity auction, before the uncertain demand has been realized. In the Supply Function Equilibrium(SFE), every firm chooses the bid maximizing his expected profit given the bids of the competitors. In case of asymmetric producers with general cost functions, previous work has shown that it is very difficult to find valid SFE. This paper presents a new numerical procedure that can solve the problem. It comprises numerical integration and an optimization algorithm that searches an end-condition. The procedure is illustrated by an example with three asymmetric firms.

Keywords: Supply function equilibrium; uniform-price auction; numerical integration; oligopoly; asymmetry; capacity constraint; wholesale electricity market (search for similar items in EconPapers)
JEL-codes: C61 D43 D44 L11 L13 L94 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2005-03-29
New Economics Papers: this item is included in nep-cmp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Related works:
Journal Article: Numerical calculation of an asymmetric supply function equilibrium with capacity constraints (2009)
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