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SUMMARY:Strategic Bidding in Multi-unit Auctions with Capacity Constrained
  Bidders: The New York Capacity Market - Sebastian Schwenen (EUI) 
DTSTART:20130527T113000Z
DTEND:20130527T130000Z
UID:TALK45558@talks.cam.ac.uk
CONTACT:Andrew Pruitt
DESCRIPTION:This paper employs a simple model to describe bidding behavior
  in multi-unit uniform price procurement auctions when firms are capacity 
 constrained. Using data from the New York City capacity auctions\, I find 
 that capacity constrained firms use simple bidding strategies to co-ordina
 te on an equilibrium that extracts high rents for all bidders. I show theo
 retically and empirically that the largest bidder submits the auction clea
 ring bid. All other bidders submit infra-marginal bids that are low enough
  to not be profitably undercut. Infra-marginal bidders react to capacity e
 ndowments and decrease their bids as the largest firm’s capacities and i
 ts profits of undercutting increase. Capacity markets\, when designed as s
 tudied here\, are a costly tool to increase security of supply in electric
 ity markets\, as capacity prices do not reflect actual capacity scarcity.
LOCATION:Castle Teaching Room\, 4th floor\, Cambridge Judge Business Schoo
 l\, Trumpington Street\, CB2 1AG
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