The Case for a Discriminatory Pricing Rule in Competitive Electricity Pools

Research output: Working paper

Abstract

We present a multi-unit common value auction model with capacity constraints which ensure the participants face a residual market. We show that a discriminatory auction performs better than a uniform one when such constraints are present. We then look at a more explicit model of electricity pools and show that the preferred uniform pricing rule can lead to equilibria that are even worse than the basic model suggests. We show that a discriminatory auction would lead to relatively more competitive prices.
Original languageEnglish
PublisherEdinburgh School of Economics, University of Edinburgh
Number of pages36
Publication statusPublished - Apr 2004

Publication series

NameESE Discussion Papers

Keywords

  • electricity pool
  • multi-unit auction

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