IDEAS home Printed from https://ideas.repec.org/a/bla/randje/v49y2018i4p995-1027.html
   My bibliography  Save this article

Comparing auction designs where suppliers have uncertain costs and uncertain pivotal status

Author

Listed:
  • Pär Holmberg
  • Frank A. Wolak

Abstract

We analyze how market design influences bidding in multiunit procurement auctions where suppliers have asymmetric information about production costs. Our analysis is particularly relevant to wholesale electricity markets, because it accounts for the risk that a supplier is pivotal; market demand is larger than the total production capacity of its competitors. With constant marginal costs, expected welfare improves if the auctioneer restricts offers to be flat. We identify circumstances where the competitiveness of market outcomes improves with increased market transparency. We also find that, for buyers, uniform pricing is preferable to discriminatory pricing when producers' private signals are affiliated.

Suggested Citation

  • Pär Holmberg & Frank A. Wolak, 2018. "Comparing auction designs where suppliers have uncertain costs and uncertain pivotal status," RAND Journal of Economics, RAND Corporation, vol. 49(4), pages 995-1027, December.
    • Handle: RePEc:bla:randje:v:49:y:2018:i:4:p:995-1027
    DOI: 10.1111/1756-2171.12259
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1756-2171.12259
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1756-2171.12259?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. David P. Brown & Andrew Eckert, 2022. "Pricing Patterns in Wholesale Electricity Markets: Unilateral Market Power or Coordinated Behavior?," Journal of Industrial Economics, Wiley Blackwell, vol. 70(1), pages 168-216, March.
    2. Shiying Chen & Zhenhuan Dong & Chunming Cao & Changjun Zheng, 2022. "Strategy and design of multi‐unit auction in grouped asymmetric setting," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 3435-3453, December.
    3. Bayona, Anna & Brandts, Jordi & Vives, Xavier, 2020. "Information frictions and market power: A laboratory study," Games and Economic Behavior, Elsevier, vol. 122(C), pages 354-369.
    4. Horn, Henrik & Tangerås, Thomas, 2021. "National Transmission System Operators in an International Electricity Market," CEPR Discussion Papers 16289, C.E.P.R. Discussion Papers.
    5. Pär Holmberg & Thomas Tangerås, 2021. "Strategic Reserves versus Market-wide Capacity Mechanisms," Working Papers EPRG2109, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    6. Edward Anderson & Pär Holmberg, 2023. "Multi-unit auctions with uncertain supply and single-unit demand," Working Papers EPRG2310, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    7. Pio Baake & Sebastian Schwenen & Christian von Hirschhausen, 2020. "Local Power Markets," Discussion Papers of DIW Berlin 1904, DIW Berlin, German Institute for Economic Research.
    8. Natalia Fabra & Gerard Llobet, 2023. "Auctions with Privately Known Capacities: Understanding Competition Among Renewables," The Economic Journal, Royal Economic Society, vol. 133(651), pages 1106-1146.
    9. Khezr, Peyman & Nepal, Rabindra, 2021. "On the viability of energy-capacity markets under decreasing marginal costs," Energy Economics, Elsevier, vol. 96(C).
    10. Brown, David P. & Cajueiro, Daniel O. & Eckert, Andrew & Silveira, Douglas, 2023. "Information and Transparency: Using Machine Learning to Detect Communication," Working Papers 2023-6, University of Alberta, Department of Economics.
    11. Ambrosius, M. & Egerer, J. & Grimm, V. & Weijde, A.H. van der, 2020. "Uncertain bidding zone configurations: The role of expectations for transmission and generation capacity expansion," European Journal of Operational Research, Elsevier, vol. 285(1), pages 343-359.
    12. Sirin, Selahattin Murat & Erten, Ibrahim, 2022. "Price spikes, temporary price caps, and welfare effects of regulatory interventions on wholesale electricity markets," Energy Policy, Elsevier, vol. 163(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:randje:v:49:y:2018:i:4:p:995-1027. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/randdus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.