{"title":"The Auction of Contracts by Consumer Groups and the Effect on Market Power","authors":"Pablo Serra","doi":"10.1007/s11151-024-09943-3","DOIUrl":null,"url":null,"abstract":"<p>This article discusses the auctioning of financial contracts by aggregations of consumers who aim to reduce the spot price of a concentrated industry’s product; this is a frequent arrangement in electricity markets. The contracts' underlying asset is the product; the auctions' bidding variable is the strike price; and the bidders are the producers. Using a three-stage complete-information game, we show that when all consumers belong to some group, in the subgame perfect Nash equilibrium, each group fully hedges its consumption, and total output reaches its efficient level. Otherwise, each group over-hedges its consumption, and total production is below the efficiency level.</p>","PeriodicalId":47454,"journal":{"name":"Review of Industrial Organization","volume":"42 1","pages":""},"PeriodicalIF":0.8000,"publicationDate":"2024-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Review of Industrial Organization","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.1007/s11151-024-09943-3","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"ECONOMICS","Score":null,"Total":0}
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Abstract
This article discusses the auctioning of financial contracts by aggregations of consumers who aim to reduce the spot price of a concentrated industry’s product; this is a frequent arrangement in electricity markets. The contracts' underlying asset is the product; the auctions' bidding variable is the strike price; and the bidders are the producers. Using a three-stage complete-information game, we show that when all consumers belong to some group, in the subgame perfect Nash equilibrium, each group fully hedges its consumption, and total output reaches its efficient level. Otherwise, each group over-hedges its consumption, and total production is below the efficiency level.
期刊介绍：
New Online Manuscript Submission System The Review of Industrial Organization publishes research papers on all aspects of industrial organization, broadly defined. A main focus is on competition and monopoly, in their many forms and processes and their effects on efficiency, innovation, and social conditions. Topics may range from the internal organization of enterprises to wide international comparisons.
The Review is also increasing its interest in papers on public policies such as antitrust, regulation, deregulation, public enterprise, and privatization. Papers may deal with any economic sectors and any developed economies.
The Review continues its primary interest in ideas that can be verified by econometric evidence, case studies, or other real conditions. But the Review also seeks papers that advance significant theories of industrial organization and policy. Papers using abstract techniques and econometric tests should present the methods and analysis in plain enough English so that non-specialist readers can evaluate the content.
The Review welcomes submissions from any source, and the Editors will make every effort to have papers reviewed quickly and to give prompt decisions. The Editors will also seek to arrange symposia on specific topics, and they are open to proposals for grouped papers. They also welcome shorter notes and commentaries on topics of interest to the profession.
Officially cited as: Rev Ind Organ
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