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A Comparison of Pay‐As‐Bid and Market‐Clearing Price Bidding Processes in Electric Utility Auctions
Author(s) -
Berry Keith
Publication year - 2014
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.2612
Subject(s) - bidding , market clearing , clearing , economics , common value auction , microeconomics , electric utility , variance (accounting) , market price , business , finance , chemistry , accounting
As the electric utility industry moves to Regional Transmission Organizations, there are more opportunities for merchant plants in selling wholesale energy to electric utilities. Two alternative bidding regimes are considered: (i) pay‐as‐bid and (ii) pay with market‐clearing bid. With stochastic price‐sensitive demand, we show that pay‐as‐bid has greater average price, but lower price variance than does market‐clearing price. Copyright © 2013 John Wiley & Sons, Ltd.