Strategic bidding of quantities in uniform price day ahead auction — conjectured supply function approach

In this paper, optimal bidding strategy in a day- ahead uniform price auction is analysed. It is assumed that strategically bidding generators submit true marginal cost functions but may withdraw a part of their capacity. The remaining generators react to that by increasing their output. Results suggest that strategically bidding generators may significantly increase their profits by boosting market clearing price. In the absence of external back-up supplies, withdrawing capacity may lead to a market collapse when the sum of submitted bids is less than the system demand. Finally a day- ahead bidding strategy was analysed when generators have to submit one bid curve valid for a whole day. This resulted in a much smoother outputs and profits supporting the argument that in order to avoid gaming, bidding should be for as long period ahead as possible.