Rscas_2009_69_from uniform auction to discriminatory auction

Moen, Jan. November, The European Union has a long experience and many success stories when it comes both to build a borderless Europe and to ensure that benefits are fairly distributed among producers and end-use customers. In some sectors results and benefits arise quickly, but sometimes borders remain difficult to cross despite numerous initiatives. A typical example of this is the completion of the single market for electricity. The process has been ongoing since the early s and major progress has been made.

However, we are still far from a borderless and truly competitive electricity market across Europe. A new legislative framework, the Third Package, will enter into force shortly and yield strong expectations. However, growing concerns become apparent among policy makers and in the market place on its ability to effectively foster the completion of the internal market and tackle market power issues. This paper argues that the approach adopted in the Third Package is not adapted to the challenges the European Union faces in electricity.

The current lack of focus on implementing a better market design architecture leads the EU regulatory framework to overlooks important issues such as the promotion of power exchanges. Anderson, Edward J. Mixed Strategies in Discriminatory Divisible-good Auctions. Using the concept of market-distribution functions, we derive general optimality conditions for discriminatory divisible-good auctions, which are also applicable to Bertrand games and non-linear pricing.

We introduce the concept of offer distribution function to analyze randomized offer curves, and characterize mixed-strategy Nash equilibria for pay-as-bid auctions where demand is uncertain and costs are common knowledge; a setting for which pure-strategy supply function equilibria typically do not exist. We generalize previous results on mixtures over horizontal offers as in Bertrand-Edgeworth games, but more importantly we characterize novel mixtures over partly increasing supply functions.

Paper, 37 pages. Motivated by the new auction format introduced in the England and Wales electricity market and the recent debate in California, we charac- terize bidding behavior and market outcomes in uniform, discriminatory and Vickrey electricity auctions.

The aim is to gain an improved under- standing of how different auction formats affect the degree of competition and overall welfare in decentralized electricity markets.

We find that the uniform auction is weakly outperformed in consumer surplus terms by the discriminatory auction, but that uniform auctions are weakly more efficient. Vickrey auctions guarantee productive efficiency, but at the expense of large payments to firms. The overall welfare ranking of the auctions is thus ambiguous.

The paper also clarifies some methodological issues in the analysis of electricity auctions. In particular we show that analogies with continuous share auctions are misplaced so long as firms are restricted to a finite number of bids.

We also provide a characterization of multi-unit Vickrey auctions with reserve pricing.Many agri-environmental conservation programs are faced with the problem of imperfect monitoring. This provides farmers with an incentive for noncompliance, because they can receive subsidies without implementing the conservation scheme.

In this paper, bidding behavior and auction performance are compared for discriminatory-price and uniform-price auctions in an imperfect monitoring environment. Our theoretical analysis suggests that auction performances are equalized between the discriminatory-price and uniform-price auctions.

However, laboratory experiments reveal that, although the discriminatory-price auction has an advantage in terms of reducing policy costs, it is more likely to cause adverse selection. As a result, the uniform-price auction tends to have higher efficiency and cost-effectiveness when compliance behavior is taken into account. This is a preview of subscription content, access via your institution.

Rent this article via DeepDyve. Abbink K, Brandts J, McDaniel T Asymmetric demand information in uniform and discriminatory call auctions: an experimental analysis motivated by electricity markets.

J Regul Econ 23 2 : — Article Google Scholar. Sage, Beverly Hills. Google Scholar. Alm J, Jacobson S Using laboratory experiments in public economics. Natl Tax J 60 1 : — Am Econ Rev 82 4 : — Land Econ 82 3 : — Cason TN, Gangadharan L A laboratory comparison of uniform and discriminative price auctions for reducing non-point source pollution.

Land Econ 81 1 : 51— Cason TN, Gangadharan L Emissions variability in tradable permit markets with imperfect enforcement and banking. J Econ Behav Organ 61 2 : — J Environ Econ Manag 46 3 : — Choe C, Fraser I A note on imperfect monitoring of agri-environmental policy. J Agric Econ 49 2 : — Choe C, Fraser I Compliance monitoring and agri-environmental policy.As the access to this document is restricted, you may want to search for a different version of it.

Lawrence M. Raghuram G. Vishny, Vishny, "undated". Volpin, Discussion Papers. Levine, Ross, Robert Wilson, Rajan, Raghuram G. Zender, Tenorio, Rafael, Michael J. Fleming, Umlauf, Steven R.

Enrico C. Monostori, Zoltan, Marszalec, Daniel, Todd R. Kastl, Jakub, Pamela Cardozo, Gallen, School of Finance. Eduardo Anthony G. Harold L. Oleksandr Kikot', Kaplan, Todd R.

Conservation Auctions and Compliance: Theory and Evidence from Laboratory Experiments

Wittwer, Milena, Most related items These are the items that most often cite the same works as this one and are cited by the same works as this one. Damianov, Damian S. Damian S. Beck, T. Lee, Bong-Soo, Ronald Fischer, Ping Zhang, Roe, Mark J. Moskowitz, Most discussions of treasury auction design focus on the choice between two methods for issuing securities—uniform-price or discriminatory auctions. Although auction theory and much recent research appear to favor the uniform-price method, most countries conduct their treasury auctions using the discriminatory format.

What are the main issues underlying the debate over effective auction design? Treasury auctions—in which a government sells securities to finance its debt—are a natural, but often overlooked, candidate for institutional reform. By broadening participation in treasury auctions and increasing auction revenues, governments could potentially save millions of dollars.

In recent years, the U. If a more cost-effective design could be identified and adopted, each 0. In this edition of Current Issues, we examine the two main auction methods in use today to issue treasury securities—discriminatory and uniform-price auctions.

Drawing on the theory of auction design and the empirical findings of earlier researchers, we discuss the revenue potential of these two auction methods and their vulnera-bility to noncompetitive behavior by bidders. Surprisingly, while much of the lit-erature suggests that uniform-price auctions may out-perform discriminatory auctions in producing revenues for treasuries and limiting the scope for noncompetitive behavior, most countries conduct their treasury auctions using the more traditional discriminatory format.

This split between theory and practice is likely to lead to increased experimentation with new auction formats in the next several years. Documents: Advanced Search Include Citations. Authors: Advanced Search Include Citations. Abstract Most discussions of treasury auction design focus on the choice between two methods for issuing securities—uniform-price or discriminatory auctions.

Keyphrases treasury security treasury auction effective auction uniform-price auction discriminatory auction noncompetitive behavior auction yield discriminatory format uniform-price method government security treasury auction design focus industrial country forty-two country use today treasury security discriminatory much recent research institutional reform marketable security widespread growth percent reduction annual federal deficit auction revenue auction method effective auction design current issue main issue auction design cost-effective design revenue potential traditional discriminatory format next several year lit-erature suggests effective method policymakers concern researcher view new auction format recent year actual practice design change u.

Powered by:.Multi-unit ascending auctions allow for equilibria in which bidders strategically reduce their demand and split the market at low prices. At the same time, they allow for preemptive bidding by incumbent bidders in a coordinated attempt to exclude entrants from the market.

We consider an environment where both demand reduction and preemptive bidding are supported as equilibrium phenomena of the ascending auction. In a series of experiments, we compare its performance to that of the discriminatory auction. Strategic demand reduction is quite prevalent in the ascending auction even when entry imposes a large negative externality on incumbents. This is a preview of subscription content, access via your institution.

Rent this article via DeepDyve. See also Cramton and Schwartz Grimm et al. Demand reduction has also been observed in the laboratory. Alsemgeest et al. They find evidence for demand reduction in the open ascending auction, which generally yields lower revenues than the sealed-bid format.

rscas_2009_69_from uniform auction to discriminatory auction

Demand reduction occurs in both the sealed-bid uniform-price and the open ascending auction, but the level of demand reduction is more pronounced in the latter. Kagel and Levin obtain a similar finding for a setting where the single human bidder faces a tradeoff between bidding above value due to synergies and demand reduction.

Engelmann and Grimm compare five auction formats: the sealed-bid uniform-price, the open ascending, the discriminatory, the Vickrey, and the Ausubel auction. They observe more demand reduction in the open ascending auction than in the sealed-bid uniform-price auction. Finally, List and Lucking-Reiley conduct a field experiment with sports cards and find evidence for demand reduction in the sealed-bid uniform-price auction, although revenues do not differ from those of a Vickrey auction because bidders bid too high on the first unit.

Pooling the results of these different studies suggests that demand reduction is more pronounced in open ascending auctions than in sealed-bid uniform-price auctions. See Jehiel et al. Klempererp.

rscas_2009_69_from uniform auction to discriminatory auction

We chose to focus attention to the two auction formats that are most often observed in practice. The optimal format is unknown for our setting, see Jehiel et al. Note that the actual number of units bought by X is irrelevant for the external effect, as long as this number is positive. In accordance with the usual practice of license auctions, we did not use reserve prices in either auction format. In the recent 3G auctions, most countries refrained from setting a reserve price Netherlands or they set very low reserve prices e.

These upper limits were never reached in the experiments neither in the ascending nor in the discriminatory auctions. Notice that in both auctions there was a possibility that some goods remained unsold in a period.

rscas_2009_69_from uniform auction to discriminatory auction

In the ascending auctions this happened when the sum of the initially demanded quantities was less than 6. In the discriminatory auctions this would occur when in total fewer than 6 bids were submitted.

If bidders behave competitively also off the equilibrium path, bidders have no incentive to deviate from their own competitive bidding strategy. Recall that if the other bidders each demand two licenses and bidder 3 initially demands three licenses, she cannot lower her demand below two licenses since total demand cannot fall below the total supply of six licenses.

As for the case without externalities, off the equilibrium path strategies are assumed to be such that, if one of the bidders deviates before price level p is reached by reducing demand to one or two unitsthe other bidders behave as if no deviation has occurred. Suppose two bidders each submit only a single bid that applies to all three licenses. Lebrun and Tremblay prove that for the case of two bidders and no externalitiesthe equilibrium in which bidders submit only a single bid is the unique equilibrium of the discriminatory auction.

The equilibrium bid functions of Proposition 3 can also be derived more directly. The demand reduction equilibrium may also vanish in some cases where the negative externality depends on the number of units bought by the entrant.

If the difference in negative externality when the entrant acquires 2 licenses instead of 1 license is sufficiently large, an incumbent may want to deviate from equally sharing the licenses and try to obtain 3 units so that possibly only 1 unit remains for the entrant when the other incumbent bids sufficiently high on the remaining 2 units. With this in mind, one could consider allowing an incumbent to purchase four units.

This would prevent a monopoly, but would still allow an incumbent to aggressively pursue preemption even if the other incumbent wanted to settle on demand reduction. Parts 1 and 2 of the experiment resulted in statistically similar revenues for 5 out of 6 treatments; when we consider the realized revenues as a fraction of the available Nash revenues at the preemptive equilibrium, the only significant difference is obtained for the treatment discMo, Gus and the WDE team seemed to always solve, and surpass all of my concerns and expectations.

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Here’s How You Choose Your Auction Reserve Price

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Sovereign debt auctions: Uniform or discriminatory?

Serving over 20 years at Epsilon, Bryan has been CEO since 2009, following prior roles as President, Chief Operating Officer and Chief Technology Officer. Prior to that, he held management positions with Capstead Mortgage Corporation. Martin Kihn leads the data-driven marketing practice at Gartner, focusing on ad tech, cross-channel, predictive and attribution analytics.

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