Market design and motivated human trading behavior in electricity markets

The paper is based on a series of controlled experiments in the trading of wholesale electricity that expands substantially the scope of the research program reported previously (S. Backerman S. Rassenti and V. Smith, 1998; S. Backerman, M. Denton, S. Rassenti and V. Smith, 1998; M. Denton et al., 1998). The experiments employed cash motivated students and rented computer laboratory facilities of the University of Arizona. The primary objective of these experiments was to compare two alternative institutional arrangements for the trading of electric power. The first employed day-ahead sealed bid trading of energy for all periods in the subsequent day; the second employed simultaneous continuous double auctions for bilateral trading of energy up to the hour before delivery. All trading was executed on an eight-node network with limited transmission capacity. Each node was to be thought of as a control area, with one large wholesale generator company and one large distribution company resident there.