Determining the optimal length of regulatory guarantee: a length-of-contract auction
Change log
Authors
Greve, Thomas
Pollitt, Michael G
Abstract
We present an auction design to be used in the area of procurement that allows the length of the regulatory funding period to be determined via an auction. It allows bidders to submit bids against a payment for periods of varying lengths, say 25 and 30 years, instead of a fixed 20-year contract. This can be desirable for securing more favourable terms in financial markets. It yields efficiency and delivers the optimal length of contract, defined as where social value is maximised. The auction is applicable to any infrastructure investment such as energy, transportation or any area that uses contracts.
Description
Keywords
38 Economics, 3801 Applied Economics, 3802 Econometrics, 3803 Economic Theory, 7 Affordable and Clean Energy
Journal Title
The Economic Journal
Conference Name
Journal ISSN
0013-0133
1468-0297
1468-0297
Volume Title
127
Publisher
Wiley-Blackwell
Publisher DOI
Sponsorship
Engineering and Physical Sciences Research Council (EP/I031650/1)
The authors acknowledge the financial support of the EPSRC Autonomic Power System project (grant number EP/I031650/1)