Designing Electricity Auctions

Natalia Fabra (), Nils-Henrik M. von der Fehr and David Harbord ()

RAND Journal of Economics, 2006, vol. 37, issue 1, pages 23-46

Abstract: Motivated by the new auction format in the England and Wales electricity market, as well as the recent debate in California, we characterize bidding behavior and market outcomes in uniform and discriminatory electricity auctions. Uniform auctions result in higher average prices than discriminatory auctions, but the ranking in terms of productive efficiency is ambiguous. The comparative effects of other market design features, such as the number of steps in suppliers' bid functions, the duration of bids, and the elasticity of demand are analyzed. We also consider the relationship between market structure and market performance in the two auction formats. Ordering information: This article can be ordered from http://gemini.econ.umd.edu/cgi-bin/rje_online.cgi?action=view&year=2006&issue=spr&page=23.

Date: 2006
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Working Paper: Designing Electricity Auctions (2004)
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