Arbeitspapier

Financial Contracts as Coordination Device

We study the use of fi nancial contracts as bid-coordinating device in multi-unit uniform price auctions. Coordination is required whenever firms face a volunteer's dilemma in pricing strategies: one firm (the "volunteer") is needed to increase the market clearing price. Volunteering, however, is costly, as inframarginal suppliers sell their entire capacity whereas the volunteer only sells residual demand. We identify conditions under which signing financial contracts solves this dilemma. We test our framework exploiting data on contract positions by large producers in the New York power market. Using a Monte Carlo simulation, we show that the contracting strategy is payoff dominant and provide estimates of the benefits of such strategy.

Sprache
Englisch

Erschienen in
Series: SITE Working Paper ; No. 47

Klassifikation
Wirtschaft
Firm Behavior: Theory
Auctions
Monopolization; Horizontal Anticompetitive Practices
Thema
Auctions
Coordination
Volunteers dilemma
Forward markets
power market

Ereignis
Geistige Schöpfung
(wer)
Le Coq, Chloé
Schwenen, Sebastian
Ereignis
Veröffentlichung
(wer)
Stockholm School of Economics, Stockholm Institute of Transition Economics (SITE)
(wo)
Stockholm
(wann)
2019

Handle
Letzte Aktualisierung
10.03.2025, 11:44 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Le Coq, Chloé
  • Schwenen, Sebastian
  • Stockholm School of Economics, Stockholm Institute of Transition Economics (SITE)

Entstanden

  • 2019

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