Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/51361
Authors: 
Flinkerbusch, Kai
Year of Publication: 
2011
Series/Report no.: 
CAWM discussion paper / Centrum für Angewandte Wirtschaftsforschung Münster 52
Abstract: 
From auction theory we know that multi-unit, pay-as-bid auctions in general lead to bid shading and thus to an inefficient allocation. This result is supported by historical data from the German market for balancing power, which show that bidders bid well above their actual costs. In contrast to the pay-as-bid auction, the Vickrey auction has the dominant strategy property and bidders reveal their true opportunity cost. Consequently, the Vickrey auction allocates efficiently. In this article we show how this auction format can facilitate an efficient capacity procurement process in the German reserve market.
Subjects: 
Electricity market
balancing power
uniform-price auction
pay-as-bid auction
JEL: 
D44
N74
L11
Document Type: 
Working Paper

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