Strategic Bidding in a Multi-Unit Auction: An Empirical Analysis of Bids to Supply Electricity / Catherine D. Wolfram.

Format:

Book

Author/Creator:

Wolfram, Catherine D.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w6269.

NBER working paper series no. w6269

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Strategic Bidding in a Multi-Unit Auction

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1997.

Summary:

This paper considers the bidding behavior of participants in the daily auction to supply electricity in England and Wales. Every day, owners of generating capacity submit bids reflecting a price for power from their plants. The price bid by the last plant used to meet electricity needs in a given time period is the price paid for capacity from all plants. Theoretical work on uniform-price multi-unit auctions suggests that bidders selling more than one unit of a good have an incentive to increase the prices they bid at high quantities. If a bid sets the equilibrium price, the bidder receives a higher price for that unit as well as for all inframarginal units. I find evidence of strategic bid increases. First, plants that are likely to be used after a number of other plants are already operating bid more. Second, the larger supplier submits higher bids, all else equal. Lastly, there is some evidence that bids for given plants are higher when the suppliers have more available capacity.

Notes:

Print version record

November 1997.