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> all bids that are necessary to satisfy the demand are considered and the final price is set by the most expensive bid within that range What’s the logic here
by voisin 4y ago
> all bids that are necessary to satisfy the demand are considered and the final price is set by the most expensive bid within that range
What’s the logic here? Why not just accept bids in order of ascending price until demand is met?
- Dylan16807 4y agoBecause then everyone with cheap production starts bluffing and bidding 19.99 cents and the end result is the same price but now the market is deceptive and unstable.
- wcoenen 4y agoI don't know the answer, but this is known as a "uniform-price auction", as opposed to "pay-as-bid auction". There is a lot of literature on the subject. For electricity markets, things are complicated by the finite capacity of transmission links and lack of storage.
- pyrale 4y agoBecause then, providers would try to guess the highest bid and bid $1 lower. As every bidder would miss once in a while, that loss would be factored in prices, and raise prices overall. This bidding system ensures that everyone can publish their lowest bid with no fear of losing out, and by doing so, it maximizes publicly available data so regulators and TSOs have a good idea of what is actually available and which investments are necessary.
- deleted 4y ago[deleted]