Functional Econometrics of Multi-Unit Auctions: An Application to the New York Electricity Market, March 01 2018
Université de Montréal
This paper proposes a novel approach for the empirical analysis of multi-unit auctions, to which participants submit supply or demand functions observable by the econometrician. The approach allows for the evaluation of firm-level market power in a private information setting, and avoids having to model the market mechanism. It relies on econometric methods that treat the observed bid functions as function-valued random elements. Notably, a functional instrumental variable estimator is developed. The method is applied to the New York electricity market using rich data on firm-level bids and marginal costs for 2013-2015. In this market, daily bids are disclosed three months later in order to limit strategic behaviors. I estimate firm-level market power and compare actual bidding behavior to profit-maximizing behavior under private information. I find consistent evidence of strategic bidding, suggesting that firms are well aware of their own market power and behave accordingly. Therefore, the late disclosure of bids is not sufficient to preclude firms from acting strategically, most likely due to the repeated nature of those auctions.
OSG has organized the following events:
Regulatory, Rate, and Market Design for Energy Storage , November 1st 2017
Professor Ramteen Sioshansi
Ohio State University
Energy storage is a unique grid asset, in that it can provide services that are functionally similar to those provided by generation, transmission, and distribution assets. Most of our market designs and regulatory constructs assume that assets primarily fall into one of these three categories. This talk will introduce the challenges that are raised by this dichotomy between the capabilities of energy storage and the regulatory and market treatment of grid assets. It will also discuss some potential solutions to overcoming these challenges, including the use of storagecapacity rights.