Bidding in an Electricity Pay-as-Bid Auction
One of the main elements of the recent reform of electricity trading in the United Kingdom is the change from a uniform price auction in the wholesale market to discriminatory pricing. We analyze this change under two polar market structures (perfectly competitive and monopolistic supply), with demand uncertainty. We find that under perfect competition there is a trade-off between efficiency and consumer surplus between the two auction rules. We also establish that a move from uniform to discriminatory pricing under monopoly conditions has a negative impact on profits and output (weakly), a positive impact on consumer surplus, and ambiguous implications for welfare and average prices. Copyright 2003 by Kluwer Academic Publishers
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- von der Fehr, Nils-Henrik Morch & Harbord, David, 1993.
"Spot Market Competition in the UK Electricity Industry,"
Royal Economic Society, vol. 103(418), pages 531-46, May.
- Von der Fehr, N.H.M. & Harbord, D., 1992. "Spot Market Competition in the UK Electricity Industry," Memorandum 09/1992, Oslo University, Department of Economics.
- Klemperer, Paul D & Meyer, Margaret A, 1989. "Supply Function Equilibria in Oligopoly under Uncertainty," Econometrica, Econometric Society, vol. 57(6), pages 1243-77, November.
- Nautz, D., 1995. "Optimal bidding in multi-unit auctions with many bidders," Economics Letters, Elsevier, vol. 48(3-4), pages 301-306, June.
- Wilson, Robert, 1979. "Auctions of Shares," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 675-89, November.
- Robert G. Hansen, 1988. "Auctions with Endogenous Quantity," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 44-58, Spring.
- Green, Richard & Newbery, David M G, 1991.
"Competition in the British Electricity Spot Market,"
CEPR Discussion Papers
557, C.E.P.R. Discussion Papers.
- 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.
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
- Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-75, September.
- Catherine D. Wolfram, 1999. "Measuring Duopoly Power in the British Electricity Spot Market," American Economic Review, American Economic Association, vol. 89(4), pages 805-826, September.
- Lawrence M. Ausubel & Peter Cramton, 1995.
"Demand Reduction and Inefficiency in Multi-Unit Auctions,"
Papers of Peter Cramton
98wpdr, University of Maryland, Department of Economics - Peter Cramton, revised 22 Jul 2002.
- Lawrence M. Ausubel & Peter Cramton & Marek Pycia & Marzena Rostek & Marek Weretka, 2014. "Demand Reduction and Inefficiency in Multi-Unit Auctions," Review of Economic Studies, Oxford University Press, vol. 81(4), pages 1366-1400.
When requesting a correction, please mention this item's handle: RePEc:kap:regeco:v:24:y:2003:i:2:p:175-211. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.