Comparing Supply Function Equilibria of Pay-as-Bid and Uniform-Price Auctions

Arbeitspapier

This paper derives a Supply Function Equilibrium (SFE) of a pay-as-bid auction, also called discriminatory auction. Such an auction is used in the balancing market for electric power in Britain. For some probability distributions of demand a pure-strategy equilibrium does not exist. If demand follows an inverse polynomial probability distribution, SFE always exists. Assuming this probability distribution, the pay-as-bid procurement auction is compared to a SFE of a uniform-price procurement auction, the auction form of most electric power markets. The demand-weighted average price is found to be equal or lower in the pay-as-bid procurement auction.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2005:17

Classification and Topics

• Classification: Wirtschaft ; Existence and Stability Conditions of Equilibrium ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Auctions ; Production, Pricing, and Market Structure; Size Distribution of Firms ; Oligopoly and Other Imperfect Markets ; Electric Utilities
• Subject: Supply function equilibrium ; pay-as-bid auction ; uniform-price auction ; discriminatory auction ; oligopoly ; capacity constraint ; wholesale electricity market ; Angebot ; Auktionstheorie ; Oligopol ; Elektrizität

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Holmberg, Pär
• Event: Veröffentlichung
• (who): Uppsala University, Department of Economics
• (where): Uppsala
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/82743
• URN: urn:nbn:se:uu:diva-20119
• Last update: 10.03.2025, 11:44 AM CET