Seminar on April 6, 2018
DEPARTMENT OF INDUSTRIAL ENGINEERING
Characterization, Determinants and Productive Efficiency of Bidding in Oligopolistic Multi-unit Auctions
Department of Technology and Operations Management
Rotterdam School of Management, Erasmus University Rotterdam, The Netherlands
We conduct an empirical investigation of strategic bidding in a multi-unit auction from a centralized product market, electricity auctions, with the existence of oligopoly. The susceptibility of these auctions to the exercise of unilateral market power makes them an ideal research setting to study the determinants of oligopolistic behaviour and productive efficiency. Since electricity auctions are regulated, they have detailed market surveillance rules that must be approved by the Auctioneer. However with proliferation of electronic trading, there are millions of orders per hour and it is impossible to detect market abuse behaviour manually. We propose an analytical approach to address the cognitive and computational limitations of Auctioneers in their identification of diagnostic flags or signals of market manipulation.
In this research, we adopt a three-stage analysis approach. In the first stage, we use an efficient clustering algorithm to characterize strategic bidding through introducing five novel classification variables. We find that there are five different strategic behaviour - Inframarginal, Economic Withholder, Physical Withholder, Opportunist and Risk Averse. Given that all bidders in these auctions are professional and have more than sufficient bidding experience, the existence of these distinctive bidding strategies challenges the popular view that bidders’ strategies will converge as they gain experience. In the second stage we develop an analytical model to examine the determinants of bidders’ choice of these different strategies. We identify four bidder-level factors that are critical to bidders’ strategic choices: forward commitment, size, generation technology and portfolio-diversity. In the last stage, we analyse productive efficiency and winning likelihood of each strategy. Our analysis highlights the importance of considering together the bidders’ strategic behaviour and their market positions when detecting manipulative behaviour and evaluating the intent behind that. Our findings can be viewed as a micro-segmentation of bidder strategies in these oligopolistic auction settings and has interesting practical applications in improving decision making process of Auctioneer who is responsible of surveillance of these regulated auctions. In addition, knowledge of any domain-specific strategy dominance can be embedded within policy simulation platforms.
Ezgi Avci is a PhD Candidate in the Department of Technology and Operations Management at Rotterdam School of Management, Erasmus University. Her research interests are at the interface of operations management and finance. She focuses on development of analytical models and tools and on the design and economic analysis of auction mechanisms and pricing strategies, in the context of the private and public sector and in regulated industries, particularly energy and finance. Prior to joining academia, she has 10+ years of industry and government experience as a project executive and consultant on the following research areas: online auctions, energy and financial markets, big data analytics, time series analysis and forecasting, risk management, and decision support systems. Her work has appeared in the proceedings of various prestigious conferences such as INFORMS, IAEE, European Conference on Operational Research, Commodity and Energy Markets Conference, International Symposium on Environment and Energy Finance Issues, Operations Research and Industrial Engineering Congress, Euro Working Group for Commodities and Financial Modelling Conference, and she has a publication in the Energy Economics.
Ezgi won several awards and grants including: Jean Monnet PhD research scholarship, TUBITAK research project grant and World Bank project grant. She serves as a reviewer for the journals Energy Economics, Energy Policy and Business&Information Systems Engineering, and independent evaluator for European Cooperation in Science and Technology. She is actively involved in INFORMS , IAEE, EOQ and Oxford Energy and Environment societies, serving in master thesis committees and organizing conference sessions. Ezgi received her Industrial Engineering (M.Sc.) and Statistics (B.Sc.) degrees from Middle East Technical University. During her PhD she has been a Visiting Research Fellow at the University of Oxford.
All interested are cordially invited.
DATE: April 6, 2018
TIME: Friday, 16:00-17:00
ROOM: VYKM 6