Use of Long-term Auctions for Network Investment
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Authors
McDaniel, Tanga
Neuhoff, Karsten
Publication Date
2004-06-16Series
Cambridge Working Papers in Economics
Publisher
Faculty of Economics
Language
en_GB
Type
Working Paper
Metadata
Show full item recordCitation
McDaniel, T., & Neuhoff, K. (2004). Use of Long-term Auctions for Network Investment. https://doi.org/10.17863/CAM.5171
Abstract
Short-term auctions for access to entry terminals of the British gas-network appear to successfully allocate scarce resources and capture scarcity rent. Now long-term auctions are being introduced to guide future capacity expansion decisions. In our model the fraction of rights issued in the long-term auction turns out to be a crucial design parameter. Even a `hypothetically` optimal parameter choice can in general only satisfy one of three aims: Unbiased provision of capacity, full revelation of private information and minimisation of distortions from network effects. The results suggest that long-term auctions for transmission capacity are not necessarily preferable to regulatory approved capacity expansion.
Keywords
gas, investment, networks, regulation, Classification-JEL: D44, L95, L5, D92, Auctions
Identifiers
This record's DOI: https://doi.org/10.17863/CAM.5171
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