Understanding strategic bidding in multi-unit auctions: a case study of the Texas electricity spot market

Ali Hortaçsu and Steven L. Puller

RAND Journal of Economics, 2008, vol. 39, issue 1, pages 86-114

Abstract: We examine the bidding behavior of firms in the Texas electricity spot market, where bidders submit hourly supply schedules to sell power. We characterize an equilibrium model of bidding and use detailed firm-level data on bids and marginal costs to compare actual bidding behavior to theoretical benchmarks. Firms with large stakes in the market performed close to the theoretical benchmark of static profit maximization. However, smaller firms utilized excessively steep bid schedules significantly deviating from this benchmark. Further analysis suggests that payoff scale has an important effect on firms' willingness and ability to participate in complex, strategic market environments. Copyright (c)2008, RAND.

Downloads: (external link)
http://www.blackwell ... 41-6261.2008.00005.x link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Ordering information: This journal article can be ordered from
http://www.blackwell ... al.asp?ref=0741-6261

Access Statistics for this article

RAND Journal of Economics is edited by James Hosek

More articles in RAND Journal of Economics from RAND Corporation
Series data maintained by Christopher F. Baum ().