Anderson, Edward J. , Pr Holmberg and Andrew B. Philpott. Mixed Strategies in Discriminatory Divisible-good Auctions. IFN Working Paper No. 814, 2009. 72 pages.
Using the concept of market-distribution functions, we derive general optimality conditions for discriminatory divisible-good auctions, which are also applicable to Bertrand games and non-linear pricing. We introduce the concept of offer distribution function to analyze randomized offer curves, and characterize mixed-strategy Nash equilibria for pay-as-bid auctions where demand is uncertain and costs are common knowledge; a setting for which pure-strategy supply function equilibria typically do not exist. We generalize previous results on mixtures over horizontal offers as in Bertrand-Edgeworth games, but more importantly we characterize novel mixtures over partly increasing supply functions.
Brown, Ashley. Equitable Access to Basic Utilities: Public versus Private Provision and Beyond. Poverty in Focus. International Policy Centre for Inclusive Growth Poverty Practice, Bureau for Development Policy, UNDP. Number 18, August 2009. 36 pages.
Ashley C. Brown discusses the externalities involved in supplying basic infrastructure to those who can least afford it. He argues that, contrary to established views, cross-subsidy schemes actually benefit all users and not only the targeted population.
Moen, Jan. Regional Initiative: Which Appropriate Market Design? European University Institute, Robert Schuman Center for Advanced Studies, Florence School of Regulation. November, 2009. 44 pages.
The European Union has a long experience and many success stories when it comes both to build a borderless Europe and to ensure that benefits are fairly distributed among producers and end-use customers. In some sectors results and benefits arise quickly, but sometimes borders remain difficult to cross despite numerous initiatives. A typical example of this is the completion of the single market for electricity. The process has been ongoing since the early 1990s and major progress has been made. However, we are still far from a borderless and truly competitive electricity market across Europe. A new legislative framework, the Third Package, will enter into force shortly and yield strong expectations. However, growing concerns become apparent among policy makers and in the market place on its ability to effectively foster the completion of the internal market and tackle market power issues. This paper argues that the approach adopted in the Third Package is not adapted to the challenges the European Union faces in electricity. The current lack of focus on implementing a better market design architecture leads the EU regulatory framework to overlooks important issues such as the promotion of power exchanges. The paper reviews the current state of the art on ‘smart’ market design in the economic literature and confronts it with the concrete experiences pursued at the regional level, in the European Union and beyond. Some of the issues discussed in depth include the TSOs’ roles and institutional design, generation adequacy and the design of capacity mechanisms and the development of demand-side response programs. It shows that the EU should learn from some of the on-going initiatives pursued at the domestic and regional level and that a sound market design based on a pool/TSO central dispatch is probably the way forward.