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

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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Interdisciplinary European Studies

Trust in the European Union in Challenging Times


This is the first book in the Interdisciplinary European Studies collection. This volume provides an interdisciplinary perspective on trust in the EU from the vantage point of political science, law and economics. Lars Oxelheim, Lund University and affiliated to IFN, is one of the authors.


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