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


Ph: +46 8 665 4559
Mob: +46 72 511 6866

Interdisciplinary European Studies

The European Union and the Return of the Nation State


This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

About the book


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 |