Asymmetric demand information in uniform and discriminatory call auctions: an experimental analysis motivated by electricity markets
AbstractWe study the outcomes of experimental multi-unit uniform and discriminatory auctions with demand uncertainty. Our study is motivated by the ongoing debate about market design in the electricity industry. Our main aim is to compare the effect of asymmetric demand-information between sellers on the performance of the two auction institutions. In our baseline conditions all sellers have the same information, whereas in our treatment conditions some sellers have better information than others. In both information conditions we find that average transaction prices and price volatility are not significantly different under the two auction institutions. However, when there is asymmetric information among sellers the discriminatory auction is significantly less efficient. These results are not in line with the typical arguments made in favor of discriminatory pricing in electricity industries; namely, lower consumer prices and less price volatility. Moreover, our results provide some indication that discriminatory auctions reduce technical efficiency relative to uniform auctions.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) in its series UFAE and IAE Working Papers with number 520.02.
Date of creation: 01 Feb 2002
Date of revision:
Experiments; asymmetric information; discriminatory price auctions; uniform price auctions; electricity industries;
Find related papers by JEL classification:
- C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-07-21 (All new papers)
- NEP-ENE-2002-07-21 (Energy Economics)
- NEP-EXP-2002-07-21 (Experimental Economics)
- NEP-LAW-2002-07-21 (Law & Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- McCabe, Kevin A & Rassenti, Stephen J & Smith, Vernon L, 1990. "Auction Institutional Design: Theory and Behavior of Simultaneous Multiple-Unit Generalizations of the Dutch and English Auctions," American Economic Review, American Economic Association, vol. 80(5), pages 1276-83, December.
- Klaus Abbink & Jordi Brandts & Paul Pezanis-Christou, 2001. "The Spanish Auction for Government Securities: A Laboratory Analysis," UFAE and IAE Working Papers 482.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Gautam Goswami & Thomas Noe & Michael Rebello, 1995.
"Collusion in uniform-price auctions: experimental evidence and implications for Treasury auctions,"
95-5, Federal Reserve Bank of Atlanta.
- Goswami, Gautam & Noe, Thomas H & Rebello, Michael J, 1996. "Collusion in Uniform-Price Auctions: Experimental Evidence and Implications for Treasury Auctions," Review of Financial Studies, Society for Financial Studies, vol. 9(3), pages 757-85.
- Rassenti, Stephen J & Smith, Vernon L & Wilson, Bart J, 2003. "Discriminatory Price Auctions in Electricity Markets: Low Volatility at the Expense of High Price Levels," Journal of Regulatory Economics, Springer, vol. 23(2), pages 109-23, March.
- Van Boening, Mark V & Wilcox, Nathaniel T, 1996. "Avoidable Cost: Ride a Double Auction Roller Coaster," American Economic Review, American Economic Association, vol. 86(3), pages 461-77, June.
- Alfred E. Kahn & Peter Cramton & Robert H. Porter & Richard D. Tabors, 2001. "Pricing in the California Power Exchange Electricity Market: Should California Switch from Uniform Pricing to Pay-as-Bid Pricing?," Papers of Peter Cramton 01calpx, University of Maryland, Department of Economics - Peter Cramton, revised 27 Jan 2001.
- Abbink, Klaus & Abdolkarim Sadrieh, 1995. "RatImage - research Assistance Toolbox for Computer-Aided Human Behavior Experiments," Discussion Paper Serie B 325, University of Bonn, Germany.
- Klaus Abbink & Jordi Brandts & Paul Pezanis-Christou, 2002.
"Auctions for Government Securities: A Laboratory Comparison of Uniform, Discriminatory and Spanish Designs,"
UFAE and IAE Working Papers
551.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Abbink, Klaus & Brandts, Jordi & Pezanis-Christou, Paul, 2006. "Auctions for government securities: A laboratory comparison of uniform, discriminatory and Spanish designs," Journal of Economic Behavior & Organization, Elsevier, vol. 61(2), pages 284-303, October.
- Newbery, D. & Tanga McDaniel, 2002. "Auctions and trading in energy markets -- an economic analysis," Cambridge Working Papers in Economics 0233, Faculty of Economics, University of Cambridge.
- Carine Staropoli & Celine Jullien, 2006. "Using Laboratory Experiments to Design Efficient Market Institutions: The case of wholesale electricity markets," Grenoble Ecole de Management (Post-Print) hal-00569121, HAL.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Xavier Vila).
If references are entirely missing, you can add them using this form.