An Auction Story: How Simple Bids Struggle with Uncertainty

Aufsätze referiert extern - Web of Science

Jörn C.Richstein, Casimir Lorenz, KarstenNeuhoff

In: Energy Economics 89 (2019), 104784, 16 S.

Abstract

Short-term electricity markets are key to an efficient production by generation units. We develop a two-period model to assess different bidding formats to determine for each bidding format the optimal bidding strategy of competitive generators facing price-uncertainty. We compare the results for simple bidding, block bidding and multi-part bidding. We find that even under optimal simple and block bidding, generators face the risk of ex-post suboptimal solutions, whereas in multi-part bidding these do not occur. This points to efficiency gains of multi-part bidding in the presence of uncertainty in electricity markets.

Jörn Richstein

Wissenschaftlicher Mitarbeiter / Themenleitung Strommärkte in the Climate Policy Department

Karsten Neuhoff

Head of Department in the Climate Policy Department



JEL-Classification: D44;D47;Q48;L94
Keywords: Market design, Electricity markets, Bidding formats, Auctions,
DOI:
https://doi.org/10.1016/j.eneco.2020.104784