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Procurement auctions with losses

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Listed:
  • Benjamin Heymann

    (Criteo Technology, équipe-projet commune FAIRPLAY)

  • Alejandro Jofré

    (Universidad de Chile)

Abstract

We use a fixed point gradient flow algorithm to compute the equilibria of first-price procurement auctions in the presence of losses and Bayesian priors. We use this efficient algorithm to compare optimal, first-price and VCG auctions. This allows us to numerically estimate the social cost of sub-optimality of the nodal pricing mechanism in wholesale electricity markets. We also derive a closed form expression of the optimal mechanism procurement cost when the types are uniformly distributed.

Suggested Citation

  • Benjamin Heymann & Alejandro Jofré, 2024. "Procurement auctions with losses," Computational Management Science, Springer, vol. 21(2), pages 1-20, December.
    • Handle: RePEc:spr:comgts:v:21:y:2024:i:2:d:10.1007_s10287-024-00513-2
    DOI: 10.1007/s10287-024-00513-2
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    References listed on IDEAS

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