Using the concept of market-distribution functions, we derive general optimality conditions for discriminatory divisible-good auctions, which are also applicable to Bertrand games and non-linear pricing. We introduce the concept of o¤er distribution function to analyze randomized offer curves,...

We consider a procurement auction, where each supplier has private costs and submits a stepped supply function. We solve for a Bayesian Nash equilibrium and show that the equilibrium has a price instability in the sense that a minor change in a supplier's cost sometimes result in a major change...

Author: Edward J. Anderson, Pär Holmberg and Andrew B. Philpott Keywords: Pay-as-bid Auction; Divisible Good Auction; Mixed Strategy Equilibria; Wholesale Electricity Markets Pages: 71 Published: November 24, 2009 JEL-codes: D43; D44; C72 Download Wp814.pdf (756 kB) Abstract Using the concept of...

We study multi-unit auctions where bidders have single-unit demand and asymmetric information. For symmetric equilibria, we identify circumstances where uniform-pricing is better for the auctioneer than pay-as-bid pricing, and where transparency improves the revenue of the auctioneer. An issue...

We consider a procurement auction, where each supplier has private costs and submits a stepped supply function. We solve for a Bayesian Nash equilibrium and show that the equilibrium has a price instability in the sense that a minor change in a supplier.s cost sometimes result in a major change...

Forward sales is a credible commitment to aggressive spot market bidding, and it mitigates producers' market power in electricity markets. Still it can be profitable for a producer to make such a commitment if it results in a soft response from competitors in the spot market (strategies are...

Transport constraints limit competition and arbitrageurs' possibilities of exploiting price differences between goods in neighbouring markets, especially when storage capacity is negligible. We analyse this in markets where strategic producers compete with supply functions, as in wholesale...

This paper characterizes the Nash equilibrium in a pay-as-bid (discriminatory), divisible-good, procurement auction. Demand by the auctioneer is uncertain as in the supply function equilibrium model. A closed form expression is derived. Existence of an equilibrium is ensured if the hazard rate...

The supply function equilibrium provides a game-theoretic model of strategic bidding in oligopolistic wholesale electricity auctions. This paper presents an intuitive account of current understanding and shows how welfare losses depend on the number of firms in the market and their asymmetry....

In most wholesale electricity markets generators must submit step-function offers of supply to a uniform price auction, and the market is cleared at the price of the most expensive offer needed to meet realised demand. Such markets can most elegantly be modelled as the pure-strategy, Nash...