Article,
Strategic Bidding in a Multi-Unit Auction: An Empirical Analysis of Bids to Supply Electricity in England and Wales
RAND Journal of Economics, (1998)
Abstract
This paper considers the bididng behavior of participants in the
daily auction to supply electricity in England and Wales. Every
day, onwers of generating capacity submit bids reflecting a price
for power from their plants. The price bid by the last plant used
to meet electricity needs in a given time period is the price
paid for capacity from all plants. Theoretical work on
uniform-price multi-unit auctions suggests that bidders selling
more than one unit of a good have an incentive to increase the
prices they bid at high quantitites. If a bid sets the
equilibrium price, the bidder receives a higher price for that
unit as well as for all inframarginal units. I find evidence of
strategic bid increases. First, plants that are likely to be used
after a number of other plants are already operating bid more.
Second, the larger supplier submits higher bids, all else equal.
Lastly, bids for given plants are higher when the suppliers have
more available capacity.
