Strategic Bidding in Multi-unit Auctions with Capacity Constrained Bidders: The New York capacity market

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dc.contributor.author SCHWENEN, Sebastian
dc.date.accessioned 2012-11-22T17:26:51Z
dc.date.available 2012-11-22T17:26:51Z
dc.date.issued 2012
dc.identifier.issn 1028-3625
dc.identifier.uri http://hdl.handle.net/1814/24537
dc.description.abstract This paper employs a simple model to describe bidding behavior in multi-unit uniform price procurement auctions when firms are capacity constrained. Using data from the New York City capacity auctions, I find that capacity constrained firms use simple bidding strategies to co-ordinate on an equilibrium that extracts high rents for all bidders. I show theoretically and empirically that the largest bidder submits the auction clearing bid. All other bidders submit infra-marginal bids that are low enough to not be profitably undercut. Infra-marginal bidders react to capacity endowments and decrease their bids as the largest firm’s capacities and its profits of undercutting increase. Capacity markets, when designed as studied here, are a costly tool to increase security of supply in electricity markets, as capacity prices do not reflect actual capacity scarcity. en
dc.language.iso en en
dc.relation.ispartofseries EUI RSCAS en
dc.relation.ispartofseries 2012/62 en
dc.relation.ispartofseries Loyola de Palacio Programme on Energy Policy en
dc.subject Auctions en
dc.subject Electricity en
dc.subject Market Design en
dc.title Strategic Bidding in Multi-unit Auctions with Capacity Constrained Bidders: The New York capacity market en
dc.type Working Paper en


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