Modeling Electricity Auctions

The recent debates over discriminatory versus uniform-price auctions in the U.K. and elsewhere have revealed an incomplete understanding of the limitations of some popular auction models when applied to real-world electricity markets. This has led some regulatory authorities to prefer discriminatory auctions on the basis of reasoning from models which are not directly applicable to any existing electricity market. Vickrey auctions, although often recommended by economists, have also been ignored in these debates.