The Supply Function Equilibrium and Its Policy Implications for Wholesale Electricity Auctions

Pär Holmberg and David M Newbery

No 812, Working Paper Series from Research Institute of Industrial Economics

Abstract: The supply function equilibrium provides a game-theoretic model of strategic bidding in oligopolistic wholesale electricity auctions. This paper presents an intuitive account of current understanding and shows how welfare losses depend on the number of firms in the market and their asymmetry. Previous results and general recommendations for divisible-good/multi-unit auctions provides guidance on the design of the auction format; setting the reservation price; the rationing rule; and restrictions on the offer curves in wholesale electricity auctions.

Keywords: Wholesale Electricity Markets; Supply Function Equilibria; Competition Policy (search for similar items in EconPapers)
JEL-codes: C62 D43 D44 L94 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2009-11-05
New Economics Papers: this item is included in nep-ene
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Citations: View citations in EconPapers (2)

Published as Holmberg, Pär and David Newbery, 'The Supply Function Equilibrium and Its Policy Implications for Wholesale Electricity Auctions' in Utilities Policy, 2010, pages 209-226.

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Related works:
Journal Article: The supply function equilibrium and its policy implications for wholesale electricity auctions (2010)
Working Paper: The Supply Function Equilibrium and its Policy Implications for Wholesale Electricity Auctions (2010)
Working Paper: The supply function equilibrium and its policy implications for wholesale electricity auctions (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:0812

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