Strategic Bidding in a Multiunit Auction: An Empirical Analysis of Bids to Supply Electricity in England and Wales

Posted: 10 Sep 1998

See all articles by Catherine D. Wolfram

Catherine D. Wolfram

University of California, Berkeley - Economic Analysis & Policy Group; National Bureau of Economic Research (NBER)

Abstract

I consider bidding behavior in the daily electricity auction in England and Wales. Theoretical work on uniform-price multiunit procurement auctions suggests that bidders offering more than one unit have an incentive to increase their bids at high quantities. If a bid sets a high equilibrium price, it applies to all inframarginal units. I find evidence of strategic bid increases in the electricity auctions. First, plants that are likely to be used after other plants are already operating bid more. Second, the larger supplier submits higher bids for similar plants. Last, bids for a given plant are slightly higher on days when more of the capacity that is typically inframarginal to that plant is available.

JEL Classification: D44, L94

Suggested Citation

Wolfram, Catherine D., Strategic Bidding in a Multiunit Auction: An Empirical Analysis of Bids to Supply Electricity in England and Wales. Available at SSRN: https://ssrn.com/abstract=109831

Catherine D. Wolfram (Contact Author)

University of California, Berkeley - Economic Analysis & Policy Group ( email )

Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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