A more efficient procurement mechanism for reserver capacity in the German market for balancing power
AbstractFrom auction theory we know that multi-unit, pay-as-bid auctions in general lead to bid shading and thus to an inefficient allocation. This result is supported by historical data from the German market for balancing power, which show that bidders bid well above their actual costs. In contrast to the pay-as-bid auction, the Vickrey auction has the dominant strategy property and bidders reveal their true opportunity cost. Consequently, the Vickrey auction allocates efficiently. In this article we show how this auction format can facilitate an efficient capacity procurement process in the German reserve market. --
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Bibliographic InfoPaper provided by Center of Applied Economic Research Münster (CAWM), University of Münster in its series CAWM Discussion Papers with number 52.
Date of creation: 2011
Date of revision:
Electricity market; balancing power; uniform-price auction; pay-as-bid auction;
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- N74 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Europe: 1913-
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
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