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Designing Electricity Auctions

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Author Info

  • Natalia Fabra

    () (Universidad Carlos III de Madrid)

  • Nils-Henrik M. von der Fehr

    () (University of Oslo)

  • David Harbord

    () (Market Analysis Ltd)

Abstract

Motivated by the new auction format in the England and Wales electricity market, as well as the recent debate in California, we characterize bidding behavior and market outcomes in uniform and discriminatory electricity auctions. Uniform auctions result in higher average prices than discriminatory auctions, but the ranking in terms of productive efficiency is ambiguous. The comparative effects of other market design features, such as the number of steps in suppliers' bid functions, the duration of bids, and the elasticity of demand are analyzed. We also consider the relationship between market structure and market performance in the two auction formats. Ordering information: This article can be ordered from http://gemini.econ.umd.edu/cgi-bin/rje_online.cgi?action=view&year=2006&issue=spr&page=23 .

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 37 (2006)
Issue (Month): 1 (Spring)
Pages: 23-46

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Handle: RePEc:rje:randje:v:37:y:2006:1:p:23-46

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Web: http://gemini.econ.umd.edu/cgi-bin/rje_online.cgi

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References

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  1. Cameron, Lisa & Cramton, Peter, 1999. "The Role of the ISO in U.S. Electricity Markets: A Review of Restructuring in California and PJM," The Electricity Journal, Elsevier, vol. 12(3), pages 71-81, April.
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  4. Nils-Henrik von der Fehr & David Harbord, 2002. "Competition in Electricity Spot Markets: Economic Theory and International Experience," Industrial Organization 0203006, EconWPA.
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  7. Peter Cramton & Robert Wilson, 1998. "A Review of ISO New England's Proposed Market Rules," Papers of Peter Cramton 98mdi, University of Maryland, Department of Economics - Peter Cramton.
  8. Crampes, Claude & Creti, Anna, 2005. "Capacity Competition in Electricity Markets," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
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  11. Alfred E. Kahn & Peter Cramton & Robert H. Porter & Richard D. Tabors, 2001. "Uniform Pricing or Pay-as-Bid Pricing: A Dilemma for California and Beyond," Papers of Peter Cramton 01ej, University of Maryland, Department of Economics - Peter Cramton, revised 27 Jan 2001.
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  17. Brunekreeft, Gert, 2001. "A multiple-unit, multiple-period auction in the British electricity spot market," Energy Economics, Elsevier, vol. 23(1), pages 99-118, January.
  18. Maskin, Eric & Riley, John, 2000. "Asymmetric Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 413-38, July.
  19. Parisio, Lucia & Bosco, Bruno, 2003. "Market Power and the Power Market: Multi-unit Bidding and (In)Efficiency in Electricity Auctions," International Tax and Public Finance, Springer, vol. 10(4), pages 377-401, August.
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  23. Author One David Harbord & Author Two Chris McCoy, 2002. "Mis-Designing the UK Electricity Market," Industrial Organization 0203003, EconWPA.
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