Asymmetric demand information in uniform and discriminatory call auctions: an experimental analysis motivated by electricity markets
We study the outcomes of experimental multi-unit uniform and discriminatory auctions with demand uncertainty. Our study is motivated by the ongoing debate about market design in the electricity industry. Our main aim is to compare the effect of asymmetric demand-information between sellers on the performance of the two auction institutions. In our baseline conditions all sellers have the same information, whereas in our treatment conditions some sellers have better information than others. In both information conditions we find that average transaction prices and price volatility are not significantly different under the two auction institutions. However, when there is asymmetric information among sellers the discriminatory auction is significantly less efficient. These results are not in line with the typical arguments made in favor of discriminatory pricing in electricity industries; namely, lower consumer prices and less price volatility. Moreover, our results provide some indication that discriminatory auctions reduce technical efficiency relative to uniform auctions.
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"Collusion in Uniform-Price Auctions: Experimental Evidence and Implications for Treasury Auctions,"
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- Alfred E. Kahn & Peter Cramton & Robert H. Porter & Richard D. Tabors, 2001. "Pricing in the California Power Exchange Electricity Market: Should California Switch from Uniform Pricing to Pay-as-Bid Pricing?," Papers of Peter Cramton 01calpx, University of Maryland, Department of Economics - Peter Cramton, revised 27 Jan 2001. Full references (including those not matched with items on IDEAS)
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