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The Auction Model with Lowest Risk in a Duopolistic Electricity Market

Author

Listed:
  • Estrella Alonso

    (Escuela Técnica Superior de Ingeniería, Universidad Pontificia Comillas)

  • Gustavo Juan Tejada

    (Instituto de Matemática Interdisciplinar, Universidad Complutense de Madrid)

Abstract

The present paper models the electricity market auction as a two-person game with incomplete information under the assumption that bidders are symmetric, risk neutral and have independent private costs. Alonso and Tejada (2010) define an extensive parametric family of auction models which contains the classic auction models; Uniform, Discriminatory and Vickrey auction models. The present paper analyzes this parametric family of auction models from the viewpoint of the risk. It develops a new auction model called DV, which has lower risk than any other classic auction model.

Suggested Citation

  • Estrella Alonso & Gustavo Juan Tejada, 2012. "The Auction Model with Lowest Risk in a Duopolistic Electricity Market," Económica, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 0, pages 3-21, January-D.
    • Handle: RePEc:lap:journl:579
    as

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    File URL: http://economica.econo.unlp.edu.ar/documentos/20130126114159AM_Economica_579.pdf
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    References listed on IDEAS

    as
    1. Natalia Fabra & Nils‐Henrik Fehr & David Harbord, 2006. "Designing electricity auctions," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 23-46, March.
    2. Natalia Fabra & Nils-Henrik M. von der Fehr & David Harbord, 2006. "Designing Electricity Auctions," RAND Journal of Economics, The RAND Corporation, vol. 37(1), pages 23-46, Spring.
    3. Lawrence M. Ausubel & Peter Cramton & Marek Pycia & Marzena Rostek & Marek Weretka, 2014. "Demand Reduction and Inefficiency in Multi-Unit Auctions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(4), pages 1366-1400.
    4. Thaler, Richard H, 1988. "Anomalies: The Winner's Curse," Journal of Economic Perspectives, American Economic Association, vol. 2(1), pages 191-202, Winter.
    5. Federico, Giulio & Rahman, David, 2003. "Bidding in an Electricity Pay-as-Bid Auction," Journal of Regulatory Economics, Springer, vol. 24(2), pages 175-211, September.
    6. Keith Waehrer & Ronald M. Harstad & Michael H. Rothkopf, 1998. "Auction Form Preferences of Risk-Averse Bid Takers," RAND Journal of Economics, The RAND Corporation, vol. 29(1), pages 179-192, Spring.
    7. Krishna, Vijay, 2009. "Auction Theory," Elsevier Monographs, Elsevier, edition 2, number 9780123745071.
    8. Maarten C. W. Janssen & Vladimir A. Karamychev & Emiel Maasland, 2010. "Simultaneous Pooled Auctions with Multiple Bids and Preference Lists," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 166(2), pages 286-298, June.
    9. Federico, Giulio & Rahman, David, 2003. "Bidding in an Electricity Pay-as-Bid Auction," Journal of Regulatory Economics, Springer, vol. 24(2), pages 175-211, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    auctions; Value at Risk; electricity market.;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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