5 April 8 Auctioning and Updating - Today :Designand implementation Readingsfortoday:Goulder papers(required Phaneuf chapter(optional.Seesyllabusfor

5 April 8 Auctioning and Updating - Today :Designand...

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4/8/2014 1 Today: Brief discussion of auction design. Market based emissions regulation: Design and implementation. Readings for today: Goulder papers (required); Phaneuf chapter (optional). See syllabus for complete reference. Thursday: Stakeholder meeting!! Round 2 bids due tonight: Uniform price auction!! Round 1 : Pay as bid auction
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4/8/2014 2 HOUR 1 Wednesday Friday Demand : 11,013 MW Marginal Price : $41.50 Demand : 11,013 MW Marginal Price : $39.47 0 20 40 60 80 PRICE1 0 5000 10000 15000 20000 cummw 0 20 40 60 80 100 PRICE1 0 5000 10000 15000 20000 cummw Why are some firms bidding in at $0 when this is a pay as bid auction?? Is this a good strategy? HOUR 2 Wednesday Friday Demand : 15,659 MW Marginal Price : $45 Demand : 15,659 MW Marginal Price : $53 0 20 40 60 80 PRICE2 0 5000 10000 15000 20000 cummw 0 20 40 60 80 100 PRICE2 0 5000 10000 15000 20000 cummw
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4/8/2014 3 HOUR 3 Wednesday Friday Demand : 20,141 MW Marginal Price : $58 Demand : 20,141 MW Marginal Price : $447 (!!) 40 50 60 70 80 PRICE3 0 5000 10000 15000 20000 cummw 0 100 200 300 400 500 PRICE3 0 5000 10000 15000 20000 cummw Why is the price so different across Wednesday/Friday? HOUR 4 Wednesday Friday Demand : 17,059 MW Marginal Price : $55.94 Demand : 17,059 MW Marginal Price : $47 0 20 40 60 80 PRICE4 0 5000 10000 15000 20000 cummw 0 50 100 PRICE4 0 5000 10000 15000 20000 cummw
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4/8/2014 4 Quiz # 1 How (if at all) did your bidding strategy change between the uniform price auction (practice round 0) and the pay as bid auction design (round 1)? Briefly explain the rationale for this change. Two common forms of multi unit auctions Sealed bid uniform price ESG practice round Sealed bid discriminatory (pay as bid) ESG Round 1
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4/8/2014 5 Multi unit auctions finance government debt To finance the public debt, the U.S. Treasury sells bonds, Treasury Inflation Protected Securities (TIPS), etc. to institutional and individual investors through public auctions. Treasury auctions occur regularly. Treasury accepts competitive bids in ascending order of their rate, yield, or discount margin (lowest to highest) until the quantity of awarded bids reaches the offering amount. Multi unit auctions – Treasury bills In both uniform and discriminatory auctions, bidders submit bid curves which specify how many bonds they would purchase at a given price. Bonds are allocated to highest bids. Result: bonds are allocated to those who value them most.
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4/8/2014 6 Multi unit auction design Prior to 1993, auctions of government bonds (treasury bills) were all of the discriminatory (pay as bid) type. Government accepts competitive bids in ascending order of their rate (lowest to highest) until the quantity of awarded bids reaches the offering amount. Nobel prize winners, Merton Milller and Milton Friedman, led a campaign to change the auction design from discriminatory to a uniform price auction. Leading economists advocate a change to a uniform price auction in order to reduce the government’s cost of borrowing.
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  • Spring '16
  • Meredith Fowlie
  • Lecture, Harshad number, Trigraph, emissions, design issues