On the Impact of Forward Contract Obligations in Multi-Unit Auctions

Natalia Fabra and Maria-Angeles de Frutos

No 6756, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Several regulatory authorities worldwide have recently imposed forward contract obligations on electricity producers as a way to mitigate their market power. In this paper we investigate how such contractual obligations affect equilibrium bidding in electricity markets, or in any other auction-based market. For this purpose, we introduce forward contracts in a uniform-price multi-unit auction model with complete information. We find that forward contracts are pro-competitive when allocated to relatively large and efficient firms; however, they might be anti-competitive otherwise. We also show that an increase in contract volume need not always be welfare improving. From a methodological point of view, we aim at contributing to the literature on multi-unit auctions with discrete bids.

Keywords: Forward contracts; Multi-unit auctions; Discrete bids; market power; Electricity; Antitrust remedies; Simulations (search for similar items in EconPapers)
JEL-codes: G13 L13 L94 (search for similar items in EconPapers)
Date: 2008-03
New Economics Papers: this item is included in nep-com, nep-mic and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://cepr.org/publications/DP6756 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:6756

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP6756

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().