Bidder Behavior in Multi-Unit Ascending Auctions: Evidence from Cross-Border Capacity Auctions

Laurent Lamy

No 2007-27, Working Papers from Center for Research in Economics and Statistics

Abstract: We analyse a unique data set on multi-unit ascending auctions,which contains the whole dynamic of bidders' behavior in the IFAauctionsselling the right to use the electric transmission capacity betweenFrance and England. First, we document that daily auctions suffer from a great extent of underpricing and that the winning priceand the award concentration are varying a lot across time periods.Second, we fail to explain this evidence by winner's curse-driven arguments.The time periods, which are proxying for small changes inthe bidding rules, seem to play a significant role in the extent of underpricing.Our empirical findings are consistent with the view thatdaily multi-unit ascending auctions among a small number of potentialbidders allow a large panel of outcomes, in particular very collusiveones.

Pages: 50
Date: 2007
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