The Case for a Discriminatory Pricing Rule in Competitive Electricity Pools
We present a multi-unit common value auction model with capacity constraints which ensure the participants face a residual market. We show that a discriminatory auction performs better than a uniform one when such constraints are present. We then look at a more explicit model of electricity pools and show that the preferred uniform pricing rule can lead to equilibria that are even worse than the basic model suggests. We show that a discriminatory auction would lead to relatively more competitive prices.
|Date of creation:||Jul 1999|
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- Mark Armstrong & Simon Cowan & John Vickers, 1994. "Regulatory Reform: Economic Analysis and British Experience," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510790.
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- Back, Kerry & Zender, Jaime F, 1993. "Auctions of Divisible Goods: On the Rationale for the Treasury Experiment," Review of Financial Studies, Society for Financial Studies, vol. 6(4), pages 733-64.
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