An auction story: How simple bids struggle with uncertainty

Jörn C. Richstein, Casimir Lorenz and Karsten Neuhoff ()

Energy Economics, 2020, vol. 89, issue C

Abstract: Short-term electricity markets are key to an efficient production by generation units. We develop a two-period model to assess different bidding formats to determine for each bidding format the optimal bidding strategy of competitive generators facing price-uncertainty. We compare the results for simple bidding, block bidding and multi-part bidding. We find that even under optimal simple and block bidding, generators face the risk of ex-post suboptimal solutions, whereas in multi-part bidding these do not occur. This points to efficiency gains of multi-part bidding in the presence of uncertainty in electricity markets.

Keywords: Market design; Electricity markets; Bidding formats; Auctions (search for similar items in EconPapers)
JEL-codes: D44 D47 L94 Q48 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Working Paper: An Auction Story: How Simple Bids Struggle with Uncertainty (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:89:y:2020:i:c:s0140988320301249

DOI: 10.1016/j.eneco.2020.104784

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