Supply function equilibria for uniform price auction in oligopolistic markets

Alexander Vasin (), Marina Dolmatova () and Gerhard-Wilhelm Weber ()
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Alexander Vasin: Lomonosov Moscow State University
Marina Dolmatova: Lomonosov Moscow State University
Gerhard-Wilhelm Weber: Middle East Technical University

Central European Journal of Operations Research, 2016, vol. 24, issue 4, No 3, 819-831

Abstract: Abstract We consider game-theoretic models related to the supply function auction for electricity markets. We determine the set of supply function equilibria (SFE), introduced by Klemperer and Mayer (Econometrica 57:1243–1277, 1989), for a symmetric oligopoly with linear demand, fixed marginal cost and capacity constraint. This set depends on the maximum random shock of the demand function. We also study the best response dynamics and show that in general it does not converge to any SFE. We find out sufficient conditions for the convergence and conclude on the optimal parameters of the auction.

Keywords: Supply function equilibrium; Best response dynamics; Wholesale electricity market; Oligopoly; Auctions; 91A40; 91B26; 91A80 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1007/s10100-015-0390-y

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