Supply Function Equilibria Always Exist
AbstractSupply function equilibria are used in the analysis of divisible good auctions with a large number of identical objects to be sold or bought. An important example occurs in wholesale electricity markets. Despite the substantial literature on supply function equilibria the existence of a pure strategy Nash equilibria for a uniform price auction in asymmetric cases has not been established in a general setting. In this paper we prove the existence of a supply function equilibrium for a duopoly with asymmetric firms having convex costs, with decreasing concave demand subject to an additive demand shock, provided the second derivative of the demand function is small enough. The proof is constructive and also gives insight into the structure of the equilibrium solutions.
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 University of Sydney Business School, Discipline of Business Analytics in its series Working Papers with number 1 OMEWP.
Date of creation: Apr 2011
Date of revision:
existence of equilibria; supply functions; divisible good auctions; Wholesale electricity markets;
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Holmberg, Pär & Newbery, David & Ralph, Daniel, 2013.
"Supply function equilibria: Step functions and continuous representations,"
Journal of Economic Theory,
Elsevier, vol. 148(4), pages 1509-1551.
- Holmberg, P. & Newbery, D & Ralph, D., 2008. "Supply Function Equilibria: Step Functions and Continuous Representations," Cambridge Working Papers in Economics 0863, Faculty of Economics, University of Cambridge.
- Holmberg, Pär & Newbery, David & Ralph, Daniel, 2009. "Supply Function Equilibria: Step Functions and Continuous Representations," Working Paper Series 788, Research Institute of Industrial Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Nearhos).
If references are entirely missing, you can add them using this form.