Understanding strategic bidding in multi-unit auctions: a case study of the Texas electricity spot market Academic Article uri icon

abstract

  • We examine the bidding behavior af firms in the Texas electricity spot market, where bidders submit hourly supply schedules to sell power. We characterize an equilibrium model of bidding and use detailed firm-level data on bids and marginal costs to compare actual bidding behavior to theoretical benchmarks. Firms with large stakes in the market performed close to the theoretical benchmark of static profit maximization. However, smaller firms utilized excessively steep bid schedules significantly deviating from this benchmark. Further analysis suggests that payoff scale has an important effect on firms' willingness and ability to participate in complex, strategic market environments. Copyright 2008, RAND.

published proceedings

  • The RAND Journal of Economics

altmetric score

  • 4.5

author list (cited authors)

  • Hortasu, A., & Puller, S. L.

citation count

  • 253

complete list of authors

  • Horta├žsu, Ali||Puller, Steven L

publication date

  • March 2008

publisher