Use of Long-term Auctions for Network Investment

Tanga McDaniel and Karsten Neuhoff ()

No 2003.29, Working Papers from Fondazione Eni Enrico Mattei

Abstract: Short-term auctions for access to entry terminals of the British gas-network appear to successfully allocate scarce resources and capture scarcity rent. Now long-term auctions are being introduced to guide future capacity expansion decisions. In our model the fraction of rights issued in the long-term auction turns out to be a crucial design parameter. Even a “hypothetically” optimal parameter choice can in general only satisfy one of three aims: unbiased provision of capacity, full revelation of private information and minimisation of distortions from network effects. The results suggest that long-term auctions for transmission capacity are not necessarily preferable to regulatory approved capacity expansion.

Keywords: Auctions; gas; investment; networks; regulation (search for similar items in EconPapers)
JEL-codes: D44 D92 L5 L95 (search for similar items in EconPapers)
Date: 2003-03
New Economics Papers: this item is included in nep-com and nep-mic
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Related works:
Working Paper: Use of Long-term Auctions for Network Investment (2002)
Working Paper: Use of long-term auctions for network investment (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2003.29

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