The Case for a Discriminatory Pricing Rule in Competitive Electricity Pools
AbstractWe present a multi-unit common value auction model with capacity constraints which ensure the participants face a residual market. We show that a discriminatory auction performs better than a uniform one when such constraints are present. We then look at a more explicit model of electricity pools and show that the preferred uniform pricing rule can lead to equilibria that are even worse than the basic model suggests. We show that a discriminatory auction would lead to relatively more competitive prices.
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Bibliographic InfoPaper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 39.
Date of creation: Apr 2004
Date of revision:
Electricity Pool; Multi-Unit Auction;
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-09-05 (All new papers)
- NEP-COM-2004-09-05 (Industrial Competition)
- NEP-ENE-2004-04-25 (Energy Economics)
- NEP-MIC-2004-09-05 (Microeconomics)
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- Genc, Talat S. & Reynolds, Stanley S., 2011.
"Supply function equilibria with capacity constraints and pivotal suppliers,"
International Journal of Industrial Organization,
Elsevier, vol. 29(4), pages 432-442, July.
- Talat S. Genc & Stanley S. Reynolds, 2010. "Supply Function Equilibria with Capacity Constraints and Pivotal Suppliers," Working Papers 1007, University of Guelph, Department of Economics and Finance.
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