Comparing Supply Function Equilibria of Pay-as-Bid and Uniform-Price Auctions

Pär Holmberg

No 2005:17, Working Paper Series from Uppsala University, Department of Economics

Abstract: This paper derives a Supply Function Equilibrium (SFE) of a pay-as-bid auction, also called discriminatory auction. Such an auction is used in the balancing market for electric power in Britain. For some probability distributions of demand a pure-strategy equilibrium does not exist. If demand follows an inverse polynomial probability distribution, SFE always exists. Assuming this probability distribution, the pay-as-bid procurement auction is compared to a SFE of a uniform-price procurement auction, the auction form of most electric power markets. The demand-weighted average price is found to be equal or lower in the pay-as-bid procurement auction.

Keywords: Supply function equilibrium; pay-as-bid auction; uniform-price auction; discriminatory auction; oligopoly; capacity constraint; wholesale electricity market (search for similar items in EconPapers)
JEL-codes: C62 D43 D44 L11 L13 L94 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2005-05-16
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://uu.diva-portal.org/smash/get/diva2:47892/FULLTEXT01.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:uunewp:2005_017

Access Statistics for this paper

More papers in Working Paper Series from Uppsala University, Department of Economics Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Ulrika Öjdeby ().