Bidding in an Electricity Pay-as-Bid Auction

Giulio Federico, David Rahman

Research output: Contribution to journalArticle

75 Scopus citations

Abstract

One of the main elements of the recent reform of electricity trading in the United Kingdom is the change from a uniform price auction in the wholesale market to discriminatory pricing. We analyze this change under two polar market structures (perfectly competitive and monopolistic supply), with demand uncertainty. We find that under perfect competition there is a trade-off between efficiency and consumer surplus between the two auction rules. We also establish that a move from uniform to discriminatory pricing under monopoly conditions has a negative impact on profits and output (weakly), a positive impact on consumer surplus, and ambiguous implications for welfare and average prices.

Original languageEnglish (US)
Pages (from-to)175-211
Number of pages37
JournalJournal of Regulatory Economics
Volume24
Issue number2
DOIs
StatePublished - Sep 1 2003

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