Single or Multiple Pricing in Electricity Pools?
We present a 2 bidder multi-unit, common cost auction model with uncertain demand and capacity constraints which ensure that the participants sometimes face a residual market share. The model is motivated by electricity pools. We show that a single-price auction where the bidders can submit only one bid for all units weakly dominates an auction where the bidders can make multiple-price bids in terms of average prices. In the case of uniform price auctions we give an example where the dominance is strict.
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"Demand Reduction and Inefficiency in Multi-Unit Auctions,"
Review of Economic Studies,
Oxford University Press, vol. 81(4), pages 1366-1400.
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