Arbeitspapier
Financial Contracts as Coordination Device
We study the use of fi nancial contracts as bid-coordinating device in multi-unit uniform price auctions. Coordination is required whenever firms face a volunteer's dilemma in pricing strategies: one firm (the "volunteer") is needed to increase the market clearing price. Volunteering, however, is costly, as inframarginal suppliers sell their entire capacity whereas the volunteer only sells residual demand. We identify conditions under which signing financial contracts solves this dilemma. We test our framework exploiting data on contract positions by large producers in the New York power market. Using a Monte Carlo simulation, we show that the contracting strategy is payoff dominant and provide estimates of the benefits of such strategy.
- Language
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Englisch
- Bibliographic citation
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Series: SITE Working Paper ; No. 47
- Classification
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Wirtschaft
Firm Behavior: Theory
Auctions
Monopolization; Horizontal Anticompetitive Practices
- Subject
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Auctions
Coordination
Volunteers dilemma
Forward markets
power market
- Event
-
Geistige Schöpfung
- (who)
-
Le Coq, Chloé
Schwenen, Sebastian
- Event
-
Veröffentlichung
- (who)
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Stockholm School of Economics, Stockholm Institute of Transition Economics (SITE)
- (where)
-
Stockholm
- (when)
-
2019
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Le Coq, Chloé
- Schwenen, Sebastian
- Stockholm School of Economics, Stockholm Institute of Transition Economics (SITE)
Time of origin
- 2019
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