Fabra, Natalia, Nils-Hendrik von der Fehr, and David Harbord. “Designing Electricity Auctions: Uniform, Discriminatory and Vickrey.” In, 2002.Abstract

    Fabra, Natalia, Nils-Hendrik von der Fehr and David Harbord. Designing Electricity Auctions: Uniform, Discriminatory and Vickrey. 9 November 2002. Paper, 37 pages.

    Motivated by the new auction format introduced in the England and Wales electricity market and the recent debate in California, we charac- terize bidding behavior and market outcomes in uniform, discriminatory and Vickrey electricity auctions. The aim is to gain an improved under- standing of how different auction formats affect the degree of competition and overall welfare in decentralized electricity markets. We find that the uniform auction is (weakly) outperformed in consumer surplus terms by the discriminatory auction, but that uniform auctions are (weakly) more efficient. Vickrey auctions guarantee productive efficiency, but at the expense of large payments to firms. The overall welfare ranking of the auctions is thus ambiguous. The paper also clarifies some methodological issues in the analysis of electricity auctions. In particular we show that analogies with continuous share auctions are misplaced so long as firms are restricted to a finite number of bids. We also provide a characterization of multi-unit Vickrey auctions with reserve pricing.



    Schubert, Eric, Sam Zhou, Tony Grasso, and Grace Niu. A Primer on Wholesale Market Design, 2002.Abstract

    This white paper is a primer on wholesale market design and provides background for the open meeting workshop scheduled by the Public Utility Commission of Texas for November 1, 2002. The paper is divided into six sections:

    1. Reasons for this rulemaking;

    2. Measures of an efficient, sustainable market;

    3. Architecture of power markets;

    4. Elements of a power market;

    5. Basic economics of congestion management and day-ahead markets;

    6. Descriptions of wholesale electric markets around the world.