Asymmetric Supply Function Equilibrium with Constant Marginal Costs

Arbeitspapier

In a real-time electric power auction, the bids of producers consist of committed supply as a function of price. The bids are submitted under uncertainty, before the demand by the Independent System Operator has been realized. In the Supply Function Equilibrium (SFE), every producer chooses the supply function maximizing his expected profit given his residual demand. I consider a uniform-price auction with a reservation price, where demand is inelastic and exceed the market capacity with a positive probability, and firms have identical constant marginal costs but asymmetric capacities. I show that under these conditions, there is a unique SFE, which is piece-wise symmetric.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2005:16

Classification and Topics

• Classification: Wirtschaft ; Existence and Stability Conditions of Equilibrium ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Auctions ; Production, Pricing, and Market Structure; Size Distribution of Firms ; Oligopoly and Other Imperfect Markets ; Electric Utilities
• Subject: supply function equilibrium ; uniform-price auction ; uniqueness ; asymmetry ; oligopoly ; capacity constraint ; wholesale electricity market ; Elektrizität ; Auktion ; Oligopol ; Kapazitätsauslastung ; Angebot ; Auktionstheorie

Contributors, Location and Time

• Event: Geistige Schöpfung
• (who): Holmberg, Pär
• Event: Veröffentlichung
• (who): Uppsala University, Department of Economics
• (where): Uppsala
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/82711
• URN: urn:nbn:se:uu:diva-20120
• Last update: 10.03.2025, 11:46 AM CET