The Role of Information Feedback in Local Reserve Energy Auction Markets

FCN Working Paper No. 15/2013

43 Pages Posted: 4 Feb 2014

See all articles by Christiane Rosen

Christiane Rosen

RWTH Aachen University, E.ON Energy Research Center, Institute for Future Energy Consumer Needs and Behavior (FCN)

Reinhard Madlener

RWTH Aachen University

Date Written: November 2013

Abstract

In any market, the amount of feedback provided to its participants is one of the most important design choices. In the last couple of decades, several studies on feedback information in games and its role in learning have been conducted. Some of the most notable ones are the results in learning direction theory (Selten & Stoecker, 1986), impulse balance theory (Ockenfels & Selten, 2005), and the findings by Weber (2003). All these approaches have been validated experimentally in single-unit first price auctions (e.g. Dufwenberg & Gneezy, 2002). As the focus of previous studies has been on this specific type of auction, there is little research on information feedback in multi-unit or divisible good auctions. A natural extension to the current literature is to examine the effect of auction round feedback in the latter auction formats. We contribute to this field of research by conducting such a feedback information experiment with an energy market framing. Sellers are endowed with a portfolio of various quantities at different costs. The auctioneer is a single buyer who needs to procure a fixed quantity. We investigate two treatment variables: the strength of competition and, more importantly, the amount of information provided. With regard to previous findings from single-unit first price auctions, we can con firm the influence of feedback on learning and the change in bidder behavior for the divisible good auction case. However, the impact of the competitive situation was generally stronger than the feedback effect. Also, we observe significant differences for socio-demographic factors such as gender and educational background.

Keywords: feedback information, divisible good auction, laboratory experiment, reserve energy market

JEL Classification: C91, D03, D44, D83

Suggested Citation

Rosen, Christiane and Madlener, Reinhard, The Role of Information Feedback in Local Reserve Energy Auction Markets (November 2013). FCN Working Paper No. 15/2013 . Available at SSRN: https://ssrn.com/abstract=2390212 or http://dx.doi.org/10.2139/ssrn.2390212

Christiane Rosen (Contact Author)

RWTH Aachen University, E.ON Energy Research Center, Institute for Future Energy Consumer Needs and Behavior (FCN) ( email )

Mathieustrasse 10
Aachen, 52074
Germany

Reinhard Madlener

RWTH Aachen University ( email )

School of Business and Economics / E.ON ERC
Mathieustra├če 10
Aachen, 52074
Germany
+49 241 80 49 820 (Phone)
+49 241 80 49 829 (Fax)

HOME PAGE: http://www.eonerc.rwth-aachen.de/fcn

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