Discussion Papers 1765, 30 S.
Jörn C. Richstein, Casimir Lorenz, Karsten Neuhoff
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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 and 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.
Keywords: market design, electricity markets, bidding formats, auctions
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