Procurement auctions with losses

Benjamin Heymann () and Alejandro Jofré ()
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Benjamin Heymann: Criteo Technology, équipe-projet commune FAIRPLAY
Alejandro Jofré: Universidad de Chile

Computational Management Science, 2024, vol. 21, issue 2, No 1, 20 pages

Abstract: Abstract We use a fixed point gradient flow algorithm to compute the equilibria of first-price procurement auctions in the presence of losses and Bayesian priors. We use this efficient algorithm to compare optimal, first-price and VCG auctions. This allows us to numerically estimate the social cost of sub-optimality of the nodal pricing mechanism in wholesale electricity markets. We also derive a closed form expression of the optimal mechanism procurement cost when the types are uniformly distributed.

Keywords: Auctions; Bayesian games; Line losses; Nash equilibrium; Wholesale electricity market (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10287-024-00513-2

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