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Working Paper No. 1099

Electricity Markets: Designing Auctions Where Suppliers Have Uncertain Costs

Working Paper
Holmberg, Pär and Frank A. Wolak (2015). “Electricity Markets: Designing Auctions Where Suppliers Have Uncertain Costs”. IFN Working Paper No. 1099. Stockholm: Research Institute of Industrial Economics (IFN).

Pär Holmberg, Frank A. Wolak

We analyze how market design in.uences the bidding behavior in multi-unit procurement auctions where suppliers have uncertain costs and are uncertain about the availability of production units, as in wholesale electricity markets. We .nd that the competitiveness of market outcomes improves with increased market transparency. We identify circumstances where the auctioneer prefers uniform to discriminatory pricing, and vice versa. We also identify circumstances where it should be market e¢ ciency enhancing to restrict the number of steps in the bid-schedules.

Pär Holmberg

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