Optimal contract design for energy procurement

We consider a mechanism design problem for strategic agents with multi-dimensional private information and uncertainty in their utility/cost functions. We show that the optimal mechanism is a menu of contracts that can be implemented as a nonlinear pricing scheme. We illustrate the result by considering an optimal energy procurement mechanism from a strategic seller with conventional (deterministic) and renewable (random) plants. We address the problem of risk-sharing and ex-post voluntary participation (commitment) under uncertainty.

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