Auctions in the Electricity Market: Bidding when Production Capacity Is Constrained

Electricity is an essential commodity traded at power exchanges. Its price is very volatile within a day and over the year. This raises questions about the efficiency of the trading rules. The author develops a non—cooperative auction model analyzing the bidding behavior of producers at power exchanges. Producers are limited by the production capacity of their power plants. Production costs are affiliated. This allows for independence or positive correlation. The author analyzes and compare...