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Evaluation of a Truthful Revelation Auction in the Context of Energy Markets with Nonconcave Benefits

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Author Info
Hobbs, Benjamin F, et al
Abstract

We describe a Vickrey-Clarke-Groves auction for supply and demand bidding in the face of market power and nonconcave benefits in which bidders are motivated to bid truthfully, and evaluate its use for power and gas pipeline capacity auctions. The auction efficiently allocate resources if firms maximize profit. Simulations, including an application to the PJM power market, illustrate the procedure. However, the auction has several undesirable properties. It risks being revenue deficient, can be gamed by cooperating suppliers and consumers, and is subject to the information revelation and bid-taker cheating concerns that make single item Vickrey auctions rare. Copyright 2000 by Kluwer Academic Publishers

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Publisher Info
Article provided by Springer in its journal Journal of Regulatory Economics.

Volume (Year): 18 (2000)
Issue (Month): 1 (July)
Pages: 5-32
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Handle: RePEc:kap:regeco:v:18:y:2000:i:1:p:5-32

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  1. Natalia Fabra & Nils-Henrik von der Fehr & David Harbord, 2002. "Designing Electricity Auctions," Microeconomics 0211017, EconWPA, revised 31 Aug 2003. [Downloadable!]
    Other versions:
  2. Hu, X. & Ralph, D. & Ralph, E.K. & Bardsley, P. & Ferris, M.C., 2004. "Electricity Generation with Looped Transmission Networks: Bidding to an ISO," Cambridge Working Papers in Economics 0470, Faculty of Economics, University of Cambridge. [Downloadable!]
  3. Yihsu Chen & Benjamin Hobbs & Sven Leyffer & Todd Munson, 2006. "Leader-Follower Equilibria for Electric Power and NO x Allowances Markets," Computational Management Science, Springer, vol. 3(4), pages 307-330, September. [Downloadable!] (restricted)
  4. Sven de Vries & Rakesh Vohra, 2000. "Combinatorial Auctions: A Survey," Discussion Papers 1296, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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