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Multidimensional auctions for public energy efficiency projects : evidence from the Japanese ESCO market

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  • Iimi, Atsushi

Abstract

Competitive bidding is an important policy tool to procure goods and services from the market at the lowest possible cost. Under traditional public procurement systems, however, it may be difficult to purchase highly customized objects, such as energy efficiency services. This is because not only prices but also other nonmonetary aspects need to be taken into account. Multidimensional auctions are often used to evaluate multidimensional bids. This paper examines the bidding strategy in multidimensional auctions, using data from public energy service company projects in Japan. It shows that multidimensional auctions work well, as theory predicts. The competition effect is significant. In addition, strategic information disclosure, including walk-through and preannouncement of reserve prices, can also promote energy savings and investment. Risk sharing arrangements are critical in the energy service company market. In particular, the public sector should take regulatory risk.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6485.

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Date of creation: 01 Jun 2013
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Handle: RePEc:wbk:wbrwps:6485

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Keywords: Energy Production and Transportation; Climate Change Economics; Climate Change Mitigation and Green House Gases; Debt Markets; Energy Demand;

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  1. Hiroshi Ohashi, 2008. "Effects of Transparency in Procurement Practices on Government Expenditure: A Case Study of Municipal Public Works," CIRJE F-Series, CIRJE, Faculty of Economics, University of Tokyo CIRJE-F-548, CIRJE, Faculty of Economics, University of Tokyo.
  2. Tong Li & Isabelle Perrigne, 2003. "Timber Sale Auctions with Random Reserve Prices," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 189-200, February.
  3. Wolfstetter, Elmar, 1996. " Auctions: An Introduction," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 10(4), pages 367-420, December.
  4. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, Econometric Society, vol. 46(6), pages 1251-71, November.
  5. McAfee, R. Preston & McMillan, John, 1987. "Auctions with a stochastic number of bidders," Journal of Economic Theory, Elsevier, Elsevier, vol. 43(1), pages 1-19, October.
  6. Peter C. Reiss & Matthew W. White, 2005. "Household Electricity Demand, Revisited," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 853-883.
  7. Tol, Richard S. J., 2005. "The marginal damage costs of carbon dioxide emissions: an assessment of the uncertainties," Energy Policy, Elsevier, Elsevier, vol. 33(16), pages 2064-2074, November.
  8. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, American Economic Association, vol. 84(3), pages 585-99, June.
  9. Srabana Gupta, 2002. "Competition and collusion in a government procurement auction market," Atlantic Economic Journal, International Atlantic Economic Society, International Atlantic Economic Society, vol. 30(1), pages 13-25, March.
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Cited by:
  1. Jonathan Sinton & Joeri de Wit, 2014. "Exploiting Market-Based Mechanisms to Meet Utilities' Energy Efficiency Obligations," World Bank Other Operational Studies 18678, The World Bank.

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