We consider a procurement auction, where each supplier has private costs and submits a stepped supply function. We … solve for a Bayesian Nash equilibrium and show that the equilibrium has a price instability in the sense that a minor change … in a suppliers cost sometimes result in a major change in the market price. In wholesale electricity markets, we predict …

shown that, if the number of bidders is fixed, a reserve price can be used to increase expected revenues. This comes at the … expense of efficiency when the auctioned good goes unsold. Instead, when the number of bidders is not fixed, a reserve price … may discourage entry. The reduction in the number of bidders caused by the reserve price in this situation is detrimental …