TILEC Work In Progress: Yueting Yu
Pay-as-Bid Auctions in Electricity Markets
We present a model to characterize the competitive benchmark of both uniform price auctions and pay-as-bid auctions, taking into account producers' investment incentives. We find that there is always a mark-up on cost in the market equilibrium of pay-as-bid auctions except for the top and the initial investment level is lower, which indicates inefficiency and a lack of investment incentives.
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