Do pay-as-bid auctions favor collusion? - Evidence from Germany’s market for reserve power

Sven Heim and Georg Götz

MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: We analyze a drastic price increase in the German auction market for reserve power, which did not appear to be driven by increased costs. Studying the market structure and individual bidding strategies, we find evidence for collusive behavior in an environment with repeated auctions, pivotal suppliers and inelastic demand. The price increase can be traced back to an abuse of the auction’s pay-as-bid mechanism by the two largest firms. In contrast to theoretical findings, we show that pay-as-bid auctions do not necessarily reduce incentives for strategic capacity withholding and collusive behavior, but can even increase them.

Keywords: Auctions; Collusion; Market Power; Energy Markets; Reserve Power; Balancing Power (search for similar items in EconPapers)
JEL-codes: D43 D44 D47 L11 L13 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2013
New Economics Papers: this item is included in nep-com, nep-ene and nep-eur
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Citations: View citations in EconPapers (11)

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https://www.uni-marburg.de/en/fb02/research-groups ... ers/24-2013_heim.pdf First 201324 (application/pdf)

Related works:
Journal Article: Do Pay-As-Bid Auctions Favor Collusion? Evidence from Germany's market for reserve power (2021)
Working Paper: Do Pay-As-Bid Auctions Favor Collusion? Evidence from Germany's market for reserve power (2021)
Working Paper: Do pay-as-bid auctions favor collusion? Evidence from Germany's market for reserve power (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:201324

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