2006–2010

Supply Function Equilibria of Pay-as-Bid Auctions

Reprint No. 2009:30

Author(s): Pär HolmbergYear: 2009 Title: Journal of Regulatory Economics Volume (No.): 36 (2) Pages: 154–177
Online article (restrictions may apply)


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 for a one shot game. Existence of an equilibrium is ensured if the hazard rate of the demand distribution is monotonically decreasing with respect to the shock outcome and sellers have non-decreasing marginal costs. Multiple equilibria can be ruled out for markets, for which the auctioneer's demand exceeds suppliers' capacity with a positive probability. The derived equilibrium can be used to model strategic bidding behavior in pay-as-bid electricity auctions, such as the balancing mechanism of United Kingdom. Offer curves and mark-ups of the derived equilibrium are compared to results for the SFE of a uniform-price auction.


Reference:
Holmberg, Pär (2009), "Supply Function Equilibria of Pay-as-Bid Auctions". Journal of Regulatory Economics 36(2), 154–177.

Pär Holmberg

Contact

Ph: +46 8 665 4559
Mob: +46 72 511 6866
Par.Holmberg@ifn.se

Elgar Companion to

Social Capital and Health

Martin Ljunge okt 2018.jpg

Martin Ljunge, IFN, is the author of a chapter, "Trust promotes health: addressing reverse causality by studying children of immigrants", in a new book edited by Sherman Folland and Eric Nauenberg. The cutting edge of research is presented, covering the ever-expanding social capital field.

About the book

Events

Seminars organized by IFN

 

To present ongoing research informal brown-bag seminars are held on Mondays at 11:30 am. This is an opportunity for IFN researchers to test ideas and results.

Academically oriented seminars are most of the time held on Wednesdays at 10 am. At these events researchers from IFN and other institutions present their research.

In addition, IFN organizes seminars open to the public. Topics for these are derived from the IFN research.

Research Institute of Industrial Economics, Grevgatan 34 - 2 fl, Box 55665, SE-102 15 Stockholm, Sweden | Phone: +46-(0)8-665 45 00 | info@ifn.se