Bidding in an electricity pay-as-bid auction
One of the main elements of the current reform of electricty trading in the UK is the change from a uniform price auction in the wholesale market to discriminatory pricing. We analyse this change under two polar market structures (perfectly competitive and monopolistic supply), with demand uncertainty. We find that under perfect competition there is a trade-off between efficiency and average prices between the two auction rules. We also establish that a move from uniform to discriminatory pricing under monopoly conditions has a negative impact on profits and output (weakly), and ambiguous implications for prices and welfare.
|Date of creation:||01 Apr 2000|
|Date of revision:||01 Apr 2001|
|Contact details of provider:|| Web page: http://www.nuff.ox.ac.uk/economics/|
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