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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- Klemperer, Paul D & Meyer, Margaret A, 1989. "Supply Function Equilibria in Oligopoly under Uncertainty," Econometrica, Econometric Society, vol. 57(6), pages 1243-77, November.
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- Robert Wilson, 1979. "Auctions of Shares," The Quarterly Journal of Economics, Oxford University Press, vol. 93(4), pages 675-689.
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