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Full-Text Articles in Public Economics
An Experimental Study Of Complex-Offer Auctions From Wholesale Energy Markets, Rimvydas Baltaduonis
An Experimental Study Of Complex-Offer Auctions From Wholesale Energy Markets, Rimvydas Baltaduonis
Economics Faculty Publications
A Payment Cost Minimization auction has been proposed as an alternative to the Offer Cost Minimization auction for use in wholesale electric power markets with an intention to lower procurement cost of electricity. Efficiency concerns have been raised for this proposal while assuming that the true production costs would be revealed to the auctioneer in a competitive market. Using an experimental approach, the study compares the performance of these two complex-offer auctions, controlling for the level of unilateral market power. The analysis finds that neither auction results in allocations that correspond to the true cost revelation. Two auctions perform similarly …
Efficiency In Deregulated Electricity Markets: Offer Cost Minimization Vs. Payment Cost Minimization Auction, Rimvydas Baltaduonis
Efficiency In Deregulated Electricity Markets: Offer Cost Minimization Vs. Payment Cost Minimization Auction, Rimvydas Baltaduonis
Economics Faculty Publications
A payment cost minimization (PCM) auction has been proposed to solve the problem of inflated wholesale electricity prices. In the electricity industry, where even small changes in $/MW are worth tens of millions of dollars, it is highly important that policy makers have a good understanding of the tradeoffs and impacts of new institutional rules. In this paper we examine efficiency performance of the proposed PCM auction in contrast with the offer cost minimization (OCM) auction currently used by most independent system operators (ISOs) in the United States. For most of the analysis we concentrate on production efficiency, which is …