Shared Bidding Algorithms and Competition: Evidence from Electricity Markets

Nicolas Eschenbaum

Papers from arXiv.org

Abstract: Competing firms increasingly delegate pricing and bidding decisions to algorithms supplied by the same third-party providers. We study whether a shared algorithm leads competitors to internalise one another's profits, using data from the Australian National Electricity Market, where every battery's bids are observed at 5-minute frequency and can be linked to an identifiable autobidding provider. Bids constructed by the same provider co-move, and do so more strongly after a disclosure reform made the common scarcity state easier to observe: the same information that steers batteries towards efficient arbitrage also synchronises the bids of competitors who share a provider. To separate co-movement due to shared information from joint profit maximisation, we estimate each battery's dynamic value of stored energy and reclear the market under counterfactual bids. Owner-level profits cannot rationalise observed bidding: batteries forgo profitable dispatch where it would depress the prices earned by same-provider batteries owned by rival firms, and the estimated weight on those rivals' profits is close to one. We find evidence of this conduct only where a provider's share of near-margin battery capacity exceeds roughly 30%, corresponding to an installed share of roughly 20%. The identified conduct costs consumers an annualised $5.5 million on the current fleet, and it arises at the level of the algorithm provider rather than the asset owner, a layer that ownership-based concentration screens do not capture.

Date: 2026-07, Revised 2026-07
References: Add references at CitEc
Citations:

Downloads: (external link)
https://arxiv.org/pdf/2607.13002 Latest version (application/pdf)

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

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2607.13002

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().