Download - Van koten economics experiments_ 2013.02.27
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Economics Experiments
The price-effect of transparency (REMIT)
Silvester van KotenCERGE-EI, Prague
Laboratoř experimentální ekonomie (LEE), Prague
Andreas OrtmannThe University of New South Wales, Sydney
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1. Theoretical Economics
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Engineering
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1. Theoretical Physics
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2. Bridge model experimentation
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3. Bridge
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1. Theory 2. Engineering 3. Implementation
Theoretical Physics Bridge Experimentation Bridge
Theoretical Economics Market ExperimentationExperimental & Computational
Economics
Competitive MarketEnergy Market
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• What effects have different arrangements?
1. Making (forward) markets more transparent (REMIT):• Effect on prices?
2. Way of procuring ancillary services: • System Marginal Price (SMP) • Pay-as-Bid (PaB)?
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Laboratoř experimentální ekonomie
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Earnings are paid in cash at the end of the session
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2. Making (forward) markets more transparent (REMIT)
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( ) 60p Q Q
A
Spot MarketFriday
Week 1
Demand20
20Q=20+20=40P=20
B
2345Introduction Setup Results Behavioral Structural Design
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Forward Market
( ) 60p Q Q
Spot Market
Monday
Friday
Trader
12
12 24
Demand12
12Q=12+12+24=48P=12
A
B
A
B
24
Week 12345Introduction Setup Results Behavioral Structural Design
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( ) 60p Q Q
Spot Market
23Introduction Setup Results
( ) 60p Q Q
Spot Market +
Forward Market
Quantity =48Price =12
Behavioral Structural Design
Quantity =40Price =20
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Introduction Setup Results Behavioral Structural Design Predictions
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M2, M2F, M3
Introduction Setup Outcomes Results Conclusion60
070
080
090
010
00S
pot P
rice
4 8 12 16 20 24Period
M2
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M2, M2F, M3
Introduction Setup Outcomes Results Conclusion60
070
080
090
010
00S
pot P
rice
4 8 12 16 20 24Period
M3
M2
Effect competition
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M2, M2F, M3
Introduction Setup Outcomes Results Conclusion60
070
080
090
010
00S
pot P
rice
4 8 12 16 20 24Period
M3
M2
Effect competitionM4
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M2, M2F, M3
Introduction Setup Outcomes Results Conclusion60
070
080
090
010
00S
pot P
rice
4 8 12 16 20 24Period
Effect FM transparencyM3
M2
M4
M2F
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600
700
800
900
1000
Spo
t Pric
e
4 8 12 16 20 24Period
Introduction Setup Outcomes Results Conclusion
Effect FM transparency
LARGER effect adding competitor
M2
M3
M2F
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M2, M2F, M3
Introduction Setup Outcomes Results Conclusion60
070
080
090
010
00S
pot P
rice
4 8 12 16 20 24Period
Effect FM transparency
M2
M2FM3F
M3
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M2, M2F, M3
Introduction Setup Outcomes Results Conclusion60
070
080
090
010
00S
pot P
rice
4 8 12 16 20 24Period
Effect FM transparencyLARGER THAN
Effect competition
M2
M4
M3F
M3
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• What effects have different arrangements?
1. Making (forward) markets more transparent (REMIT):• Effect on prices?
A considerable downwards pressure on prices is likely from the competitive effect of a transparent forward markets
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• What effects have different arrangements?
1. Making (forward) markets more transparent (REMIT):• Effect on prices?
2. Way of procuring ancillary services: • System Marginal Price (SMP) • Pay-as-Bid (PaB)?
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3 6 9 12105421 7 8 11
Price
System Marginal
Price
Needed reserves
Bids
Quantity
Uniform price auction
1.Procuring ancillary reserves
Profits
Profits
Profits
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3 6 9 12105421 7 8 11
PriceNeeded reserves
Bids
Quantity
Price 1
Price 2
Price 3
Zero profit!
Pay-as-bid auction
1.Procuring ancillary reserves
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3 6 9 12105421 7 8 11
PriceCosts
Quantity
Profits
Profits
Profits
Needed reserves
Pay-as-bid auction
1.Procuring ancillary reserves
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“It depends on the particulars of the setting.”
Peter Cramton & Steven Soft,The electricity journal 2006.
What is the best way to procure ancillary reserves?
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