Supply function equilibria: Step functions and continuous representations

• 成果类型: Article
• 署名作者: Holmberg, Par; Newbery, David; Ralph, Daniel
• 署名单位: Research Institute of Industrial Economics (IFN); University of Cambridge; University of Cambridge
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2013.04.020
• 发表日期: 2013
• 页码: 1509-1551
• 关键词: Multi-unit auctions; Supply function equilibria; Convergence of Nash equilibria; Wholesale electricity markets

摘要

In most electricity markets generators must submit step-function offers to a uniform price auction. These markets are often modelled as simpler pure-strategy Supply Function Equilibria (SFE) with continuous supply functions. Critics argue that the discreteness and discontinuity of the required steps drastically change Nash equilibria, invalidating predictions of the SFE model. We prove that there are sufficient conditions, offered quantities can be continuously varied, offered prices are selected from a finite set, and the density of the additive demand shock is not too steep, where the resulting stepped SFE converges to the continuous SFE as the number of steps increases, reconciling the apparently very disparate approaches to modelling electricity markets. (C) 2013 Elsevier Inc. All rights reserved.