Working Paper No. 812

The Supply Function Equilibrium and Its Policy Implications for Wholesale Electricity Auctions

Published: November 5, 2009Pages: 45Keywords: Wholesale Electricity Markets; Supply Function Equilibria; Competition Policy;JEL-codes: D43; D44; C62; L94

The Supply Function Equilibrium and Its Policy Implications for Wholesale Electricity Auctions Pär Holmberg and David Newbery

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. Previous results and general recommendations for divisible-good/multi-unit auctions provides guidance on the design of the auction format; setting the reservation price; the rationing rule; and restrictions on the offer curves in wholesale electricity auctions.

Pär Holmberg


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Sick of Inequality?

An Introduction to the Relationship between Inequality and Health

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In this book Andreas Bergh, Therese Nilsson, IFN and Lund University, and Daniel Waldenström, IFN and Paris School of Economics, France, review the latest research on the relationship between inequality and health. What does inequality mean for our health? Does increasing income inequality affect outcomes such as obesity, life expectancy and subjective well-being?


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