Working Paper No. 1099

Electricity Markets: Designing Auctions Where Suppliers Have Uncertain Costs

Published: December 18, 2015, revised April 2016Pages: 38Keywords: Cost Uncertainty; Asymmetric information; Uniform-price auction; Discriminatory pricing; Market transparency; Wholesale electricity market; Treasury auction; Bidding format; Bayesian Nash EquilibriaJEL-codes: C72; D43; D44; L13; L94
Published version

Electricity Markets: Designing Auctions Where Suppliers Have Uncertain Costs Pär Holmberg and 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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Elgar Companion to

Social Capital and Health

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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.

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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.

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