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Do pay-as-bid auctions favor collusion? - Evidence from Germany’s market for reserve power
We analyze a drastic price increase in the German auction market for reserve power, which did not appear to be driven by increased costs. Studying the market structure and individual bidding strategies, we find evidence for collusive behavior in an environment with repeated auctions, pivotal supplie...
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| Publicat a: | MAGKS - Joint Discussion Paper Series in Economics (Band 24-2013) |
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| Autors principals: | , |
| Format: | Article |
| Idioma: | anglès |
| Publicat: |
Philipps-Universität Marburg
2013
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| Matèries: | |
| Accés en línia: | PDF a text complet |
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| Sumari: | We analyze a drastic price increase in the German auction market for reserve power, which did not appear to be driven by increased costs. Studying the market structure and individual bidding strategies, we find evidence for collusive behavior in an environment with repeated auctions, pivotal suppliers and inelastic demand. The price increase can be traced back to an abuse of the auction’s pay-as-bid mechanism by the two largest firms. In contrast to theoretical findings, we show that pay-as-bid auctions do not necessarily reduce incentives for strategic capacity withholding and collusive behavior, but can even increase them. |
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| ISSN: | 1867-3678 |
| DOI: | 10.17192/es2024.0187 |