Several regulatory authorities worldwide have recently imposed forward
contract obligations on electricity producers as a way to mitigate their market
power. In this paper we investigate how such contractual obligations affect
equilibrium bidding in electriSeveral regulatory authorities worldwide have recently imposed forward
contract obligations on electricity producers as a way to mitigate their market
power. In this paper we investigate how such contractual obligations affect
equilibrium bidding in electricity markets, or in any other auction-based
market. For this purpose, we introduce forward contracts in a uniform-price
multi-unit auction model with complete information. We find that forward
contracts are pro-competitive when allocated to relatively large and efficient
firms; however, they might be anti-competitive otherwise. We also show that
an increase in contract volume need not always be welfare improving. From a
methodological point of view, we aim at contributing to the literature on multiunit
auctions with discrete bids.[+][-]