On the existence of supply function equilibria

Anderson, Edward

doi:10.1007/s10107-013-0691-7

Cited by 24 publications

(16 citation statements)

References 17 publications

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“…In the asymmetric case, SFE models generally require a numerical solution that might be difficult to compute (Anderson 2013), so our analysis is mainly confined to SFEs for a symmetric duopoly for which a single ordinary differential equation (ODE) can be solved to yield an equilibrium. Even in the symmetric case, the existence of a pure-strategy SFE cannot be taken for granted, as it depends on the level of taxation and the probability distribution of the demand shock.…”

Section: Introductionmentioning

confidence: 99%

Supply Function Equilibrium with Taxed Benefits

Ruddell

Philpott

Downward

2017

Operations Research

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Supply function equilibrium models are used to study electricity market auctions with uncertain demand. We study the effects on the supply function equilibrium of a tax, levied by the system operator, on the observed surplus of producers. Such a tax provides an incentive for producers to alter their offers to avoid the tax. We consider these incentives under both strategic and price-taking assumptions. The model is extended to a setting in which producers are taxed on the benefits accruing to them from a transmission line expansion (a beneficiaries-pay transmission charge). In this setting, we show how this tax may lead to lower prices in equilibrium.

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Section: Introductionmentioning

confidence: 99%

Supply Function Equilibrium with Taxed Benefits

Ruddell

Philpott

Downward

2017

Operations Research

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“…In optimum, the marginal benefit of increasing the price is equal to the marginal cost _________________________ 5 Notice that the expression in equation (1) applies when ( ) = 0. See Klemperer and Meyer (1989) for the symmetric case and Anderson and Hu (2008) and Anderson (2013) for the asymmetric case.…”

Section: Supply Functions and Managerial Incentivesmentioning

confidence: 99%

“…That is, the flexibility of competing in _________________________ 1 Notice that Fershtman, Judd and Kalai (1987), show that delegation changes the outcome of strategic games even under fully symmetric and perfect information. 2 To find a supply function equilibrium, demand is given by ( , ) where it is assumed that the noise element is additive, that is, ( , ) = ( ) + ; see for example, Klemperer and Meyer (1989), Anderson and Hu (2008), and Anderson (2013).…”

Section: Introductionmentioning

confidence: 99%

“…To the best of our knowledge, the analysis of incentives in delegation that draws on the notion of supply function equilibria is novel. However, supplyfunction equilibria are studied (in particular) in electricity markets where firms offer bids on how much to supply for a given price; see, for example, Anderson and Hu (2008), and Anderson (2013) and the references therein. As we do, Laussel (1992) asks about the consequences for strategic competition when the slopes of the supply functions are strategic complements.…”

Section: Introductionmentioning

confidence: 99%

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Incentives in Supply Function Equilibrium

Vetter

2015

Economics

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The author analyses delegation in homogenous duopoly under the assumption that firmmanagers compete in supply functions. He reverses earlier findings in that owners give managers incentives to act in an accommodating way. That is, optimal delegation reduces per-firm output and increases profits to above-Cournot profits. Moreover, in supply function equilibrium, the mode of competition is endogenous. This means that the author avoids results that are sensitive with respect to assuming either Cournot or Bertrand competition. JEL D22 D43 L22

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“…We know from Holmberg (2008) and Anderson (2013) that there is a unique symmetric supply function equilibrium for production capacities q when inelastic demand has support in the range [0; 2q]. We letC 0 (Q) be the marginal cost of the divisible output Q.…”

Section: Equilibrium Convergencementioning

confidence: 99%

Price Instability in Multi-Unit Auctions

Anderson

Holmberg

2015

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We consider a procurement auction, where each supplier has private costs and submits a stepped supply function. We solve for a Bayesian Nash equilibrium and show that the equilibrium has a price instability in the sense that a minor change in a supplier's cost sometimes result in a major change in the market price. In wholesale electricity markets, we predict that the bid price of the most expensive production unit can change by 1-10% due to price instability. The price instability is reduced when suppliers have more steps in their supply functions for a given production technology. In the limit, as the number of steps increases and the cost uncertainty decreases, the Bayesian equilibrium converges to a pure-strategy NE without price instability, the Supply Function Equilibrium (SFE). Terms of use: Documents in EconStor may

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On the existence of supply function equilibria

Cited by 24 publications

References 17 publications

Supply Function Equilibrium with Taxed Benefits

Supply Function Equilibrium with Taxed Benefits

Incentives in Supply Function Equilibrium

Price Instability in Multi-Unit Auctions

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