A Comparison of Pay‐As‐Bid and Market‐Clearing Price Bidding Processes in Electric Utility Auctions

Keith Berry

Managerial and Decision Economics, 2014, vol. 35, issue 4, 258-263

Abstract: As the electric utility industry moves to Regional Transmission Organizations, there are more opportunities for merchant plants in selling wholesale energy to electric utilities. Two alternative bidding regimes are considered: (i) pay‐as‐bid and (ii) pay with market‐clearing bid. With stochastic price‐sensitive demand, we show that pay‐as‐bid has greater average price, but lower price variance than does market‐clearing price. Copyright © 2013 John Wiley & Sons, Ltd.

Date: 2014
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