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Electricity is an essential commodity traded at power exchanges. Its price is very volatile within a day and over the year. This raises questions about the efficiency of the trading rules. The author develops a non-cooperative auction model analyzing the bidding behavior of producers at power exchanges. Producers are limited by the production capacity of their power plants. Production costs are affiliated. This allows for independence or positive correlation. The author analyzes and compares a uniform-price, a discriminatory, and a generalized second-price auction. Optimal bids, cost efficiency, profits, and consumer prices are examined. A simple probability density function of affiliated production costs is given and used for examples. Numerical results are presented. The results of the analysis can help improving the bidding strategies of producers, selecting the best auction type at power exchanges or detecting price manipulations.

Economics, Mathematical. --- Environmental economics. --- Microeconomics. --- Business & Economics --- Management --- Economic History --- Industrial Management --- Electric industries. --- Letting of contracts. --- Bidding, Competitive --- Bids (Contracts) --- Competitive bidding --- Competitive tendering --- Contracts, Letting of --- Tendering, Competitive --- Energy systems. --- Energy industries. --- Economic theory. --- Macroeconomics. --- Economics. --- Environmental Economics. --- Energy Economics. --- Macroeconomics/Monetary Economics//Financial Economics. --- Energy Systems. --- Economic Theory/Quantitative Economics/Mathematical Methods. --- Industries --- Contracts --- Proposal writing in business --- Proposal writing in public contracting --- Energy Policy, Economics and Management. --- Economic theory --- Political economy --- Social sciences --- Economic man --- Economics --- Price theory --- Environmental quality --- Environmental aspects --- Economic aspects --- Energy policy. --- Energy and state. --- Energy and state --- Power resources --- State and energy --- Industrial policy --- Energy conservation --- Government policy