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Some Inequalities related to the analysis of electricity auctions

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Author Info

  • Hästö, Peter

    ()
    (Department of Mathematics and Statistics)

  • Holmberg, Pär

    ()
    (Department of Economics)

Abstract

Most balaning markets of electric power are organized as uniform-price auctions. In 2001, the balancing market of England and Wales switched to a pay-as-bid auction with the intention of reducing wholesale electricity prices. Numerical simultations of an electricity auction model have indicated that this should lead to decreased average prices. In this article we prove two inequalities which give an analytic proof of this claim in the same model.

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Bibliographic Info

Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2005:23.

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Length: 7 pages
Date of creation: 26 Aug 2005
Date of revision:
Publication status: Published in Applied Mathematics Letters, 2006, pages 814-819.
Handle: RePEc:hhs:uunewp:2005_023

Contact details of provider:
Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Email:
Web page: http://www.nek.uu.se/
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Related research

Keywords: supply function equilibrium; uniform-price auction; pay-as-bid auctions; discriminatory auction; oligopoly; capacity constraint; wholesale electricity markets; inequalities;

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References

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  1. 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.
  2. Green, Richard J & Newbery, David M, 1992. "Competition in the British Electricity Spot Market," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 929-53, October.
  3. Bolle, Friedel, 1992. "Supply function equilibria and the danger of tacit collusion : The case of spot markets for electricity," Energy Economics, Elsevier, vol. 14(2), pages 94-102, April.
  4. Klemperer, Paul D & Meyer, Margaret A, 1989. "Supply Function Equilibria in Oligopoly under Uncertainty," Econometrica, Econometric Society, vol. 57(6), pages 1243-77, November.
  5. Federico, Giulio & Rahman, David, 2003. "Bidding in an Electricity Pay-as-Bid Auction," Journal of Regulatory Economics, Springer, vol. 24(2), pages 175-211, September.
  6. Holmberg, Pär, 2005. "Comparing Supply Function Equilibria of Pay-as-Bid and Uniform-Price Auctions," Working Paper Series 2005:17, Uppsala University, Department of Economics.
  7. Natalia Fabra & Nils‐Henrik Fehr & David Harbord, 2006. "Designing electricity auctions," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 23-46, 03.
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Citations

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Cited by:
  1. Hallberg, Daniel, 2006. "Cross-national differences in income poverty among Europe´s 50+," Working Paper Series 2006:14, Uppsala University, Department of Economics.
  2. Ågren, Martin, 2006. "Prospect Theory and Higher Moments," Working Paper Series 2006:24, Uppsala University, Department of Economics.
  3. Per Engström & Bertil Holmlund, 2006. "Tax Evasion and Self-Employment in a High-Tax Country: Evidence from Sweden," CESifo Working Paper Series 1736, CESifo Group Munich.
  4. Robert Wilson, 2005. "Supply Function Equilibrium in a Constrained Transmission System," Levine's Bibliography 784828000000000087, UCLA Department of Economics.
  5. Holmberg, Pär, 2005. "Comparing Supply Function Equilibria of Pay-as-Bid and Uniform-Price Auctions," Working Paper Series 2005:17, Uppsala University, Department of Economics.
  6. Johansson, Fredrik & Klevmarken, Anders, 2006. "Explaining the size and nature of response in a survey on health status and economic standard," Working Paper Series 2006:2, Uppsala University, Department of Economics.

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