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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- Klaus Abbink & Jordi Brandts & Paul Pezanis-Christou, 2001. "The Spanish Auction for Government Securities: A Laboratory Analysis," UFAE and IAE Working Papers 482.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Rassenti, Stephen J & Smith, Vernon L & Wilson, Bart J, 2003. "Discriminatory Price Auctions in Electricity Markets: Low Volatility at the Expense of High Price Levels," Journal of Regulatory Economics, Springer, vol. 23(2), pages 109-123, March.
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- Abbink, Klaus & Abdolkarim Sadrieh, 1995. "RatImage - research Assistance Toolbox for Computer-Aided Human Behavior Experiments," Discussion Paper Serie B 325, University of Bonn, Germany.
- Van Boening, Mark V & Wilcox, Nathaniel T, 1996. "Avoidable Cost: Ride a Double Auction Roller Coaster," American Economic Review, American Economic Association, vol. 86(3), pages 461-477, June.
- Goswami, Gautam & Noe, Thomas H & Rebello, Michael J, 1996.
"Collusion in Uniform-Price Auctions: Experimental Evidence and Implications for Treasury Auctions,"
Review of Financial Studies,
Society for Financial Studies, vol. 9(3), pages 757-785.
- Gautam Goswami & Thomas H. Noe & Michael J. Rebello, 1995. "Collusion in uniform-price auctions: experimental evidence and implications for Treasury auctions," FRB Atlanta Working Paper 95-5, Federal Reserve Bank of Atlanta.
- 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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