Modifying the uniform-price auction to eliminate ‘collusive-seeming equilibria’

The uniform-price auction is used in many regional electricity procurement auctions and its “collusive-seeming equilibria” have been linked to potential exercise of market power. Such equilibria do not exist, however, if a small amount of cash is split among rationed bidders. To shed light on what drives this result, I also examine variations in which the auctioneer is able to increase and/or decrease quantity after receiving the bids. “Increasable demand” also eliminates all collusive-seeming equilibria. These results suggest ways to modify the uniform-price auction in order to reduce the potential exercise of market power.

[1]  Robert B. Wilson.  Auctions of Shares , 1979 .

[2]  M. Whinston,et al.  Menu Auctions, Resource Allocation, and Economic Influence , 1986 .

[3]  P. Klemperer,et al.  Supply Function Equilibria in Oligopoly under Uncertainty , 1989 .

[4]  R. Green,et al.  Competition in the British Electricity Spot Market , 1992, Journal of Political Economy.

[5]  Jaime F. Zender,et al.  Auctions of Divisible Goods: On the Rationale for the Treasury Experiment , 1993 .

[6]  Steven R. Umlauf.  An empirical study of the Mexican Treasury bill auction , 1993 .

[7]  Thomas H. Noe,et al.  Collusion in Uniform-Price Auctions: Experimental Evidence and Implications for Treasury Auctions , 1996 .

[8]  Lawrence M. Ausubel,et al.  Demand Reduction and Inefficiency in Multi-Unit Auctions , 2014 .

[9]  Loretta J. Mester,et al.  Uniform-Price Auctions : Update of the Treasury Experience , 1998 .

[10]  Yvan Lengwiler.  The multiple unit auction with variable supply , 1998 .

[11]  David McAdams,et al.  Increasable Supply and "Collusive-Seeming Equilibria" in the Uniform-Price Auction , 1999 .

[12]  Jeroen M. Swinkels,et al.  Efficiency and Information Aggregation in Auctions , 2000 .

[13]  David McAdams.  Isotone Equilibrium in Multi-Unit Auctions , 2000 .

[14]  James Bushnell,et al.  Diagnosing Market Power in California's Restructured Wholesale Electricity Market , 2000 .

[15]  William W. Hogan,et al.  ON THE EXERCISE OF MARKET POWER THROUGH STRATEGIC WITHHOLDING IN CALIFORNIA , 2001 .

[16]  Kerry Back,et al.  Auctions of divisible goods with endogenous supply , 2001 .

[17]  Paul L. Joskow,et al.  A Quantitative Analysis of Pricing Behavior in California's Wholesale Electricity Market During Summer 2000 , 2001 .

[18]  Jaime F. Zender,et al.  Auctioning divisible goods , 2002 .