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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- Wilson, Robert, 1979. "Auctions of Shares," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 675-89, November.
- 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, June.
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- William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, 03.
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