Abstract:
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.
