Title: Comparing Supply Function Equilibria of Pay-as-Bid and Uniform-Price Auctions
Abstract: This paper derives a Supply Function Equilibrium (SFE) of a pay-as-bid auction, also called discriminatory auction. Such an auction is used in the balancing market for electric power in Britain. For some probability distributions of demand a pure-strategy equilibrium does not exist. If demand follows an inverse polynomial probability distribution, SFE always exists. Assuming this probability distribution, the pay-as-bid procurement auction is compared to a SFE of a uniform-price procurement auction, the auction form of most electric power markets. The demand-weighted average price is found to be equal or lower in the pay-as-bid procurement auction.
Publication Year: 2005
Publication Date: 2005-05-16
Language: en
Type: preprint
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Cited By Count: 17
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