Price instability in multi-unit auctions
| Autor: | Edward J. Anderson, Pär Holmberg |
|---|---|
| Rok vydání: | 2018 |
| Předmět: |
NASH EQUILIBRIA
TheoryofComputation_MISCELLANEOUS Computer Science::Computer Science and Game Theory Economics and Econometrics Supply shock Convergence of Nash equilibria Economics POWER Mid price DIVISIBLE-GOOD AUCTIONS Price elasticity of supply Social Sciences 1401 Economic Theory COMPETITION Microeconomics EMPIRICAL-ANALYSIS Bayesian game Procurement Business & Economics 0502 economics and business Market price ELECTRICITY MARKETS Production (economics) Common value auction Price of stability 050207 economics Wholesale electricity markets Economic Theory 1499 Other Economics 050205 econometrics SUPPLY FUNCTION EQUILIBRIA Supply business.industry 05 social sciences TheoryofComputation_GENERAL OLIGOPOLY Reservation price Price instability Indivisible unit INFERENCE Electricity Bid price business Limit price Multi-unit auctions GENERATION |
| Zdroj: | Journal of Economic Theory. 175:318-341 |
| ISSN: | 0022-0531 |
| DOI: | 10.1016/j.jet.2018.01.008 |
| Popis: | We consider a procurement auction, where each supplier has private costs and submits a stepped supply function. We solve for a Bayesian Nash equilibrium and show that the equilibrium has a price instability in the sense that a minor change in a supplier’s cost sometimes result in a major change in the market price. In wholesale electricity markets, we predict that the bid price of the most expensive production unit can change by 1-10% due to price instability. The price instability is reduced when suppliers have more steps in their supply functions for a given production technology. In the limit, as the number of steps increases and the cost uncertainty decreases, the Bayesian equilibrium converges to a pure-strategy NE without price instability, the Supply Function Equilibrium (SFE). |
| Databáze: | OpenAIRE |
| Externí odkaz: |
|
Full Text from ScienceDirect