Working Paper
Abstract: In large procurement auctions, the aggregate capacity of any subset of constrained suppliers rarely equals total demand. Under a prevalent market-clearing rule, bidders win the residual demand left unmet by more competitive suppliers, and their price equals the bid of the residual awardee. I characterize the unique equilibrium of this auction under common knowledge of asymmetric capacities and private costs, finding that larger-capacity suppliers bid less competitively. Structural estimation and counterfactual analysis using India’s renewable capacity auction reveals that discriminatory pricing and Vickrey-Clarke-Groves mechanisms reduce the probability of inefficient allocation by 0.4 and 0.55, respectively, while lowering expenditure.
Selected works in progress
Title: Designing Mechanisms to Fund Innovation in Greenhouse Gas Removal (joint with Christopher Snyder, Dartmouth; Emmanuel Murray Leclair, University of Melbourne; Rachel Glennerster, UChicago; William Arnesen, Harvard; Alexander Slaski, MSA; Eric Trueswell, MSA)
Draft is available upon request.
The paper studies the optimal design of pull-funding mechanisms to incentivise innovation in greenhouse gas removal. A static optimal mechanism takes the form of a funder commitment to a future second-price auction after innovators invest in R&D and learn their production costs. Setting the reserve-price ceiling equal to the social cost of carbon allows the mechanism to implement the first best. An alternative design in which the auction is conducted before firms learn their production costs can be preferable when only a few firms enter at the optimum and early contracting sufficiently reduces firms’ cost of capital. We are currently extending the mechanism to incorporate learning-by-doing dynamics.
Title: When the Earth is Too Hot to Handle: Experimental Evidence on Protecting Manual Outdoor Workers from Extreme Heat
(Joint with Aditi Kharb, UCD and Akansh Khandelwal, JGU); study funded by International Growth Centre -India Sustainable Growth Hub Grant Number IND-25292
Draft is available upon request.
This IGC-ISGH funded paper estimates the effect of extreme heat on labor supply decisions and productivity of manual outdoor labourers in low income setting. The estimates use administrative data from India's National Rural Employment Guarantee Scheme (NREGS), and primary data which included a discrete choice experiment. We find that one degree Celsius increase in nighttime temperature is associated with a 2.8% increase in absence the following day. A day with a maximum temperature of 40 °C or higher lowers the wage paid by 9.8% of the administratively set wage, relative to a day of 30–35°C. The DCE reveals workers value a one-hour shift in timing to cooler hours at INR 17/day.
Title: Auction of price guarantee contracts with privately known stochastic quantity response: case of contracts for difference (joint with Elnaz Bajoori, University of Bath)
Price guarantees are often used to subsidise and mitigate market risks in systemically important sectors like electricity and agriculture. In electricity sector, the guaranteed price is often determined through auctions of contracts for difference (CfDs), where holders are paid the difference between strike price and market price. The paper compares auctions of one-sided CfD and two-sided CfD. In one-sided CfD, the holder is paid only if the market price is below strike. In two-sided, the holder, additionally, pays to the contract-underwriter, any negative difference between strike and market price. The paper finds conditions where the one-sided CfD auctions result in lower or higher expected transfer from auctioneer to the winner, when bidders have private information of their cost and ability to give a quantity-response to the market price.
Other projects in the pipeline
Privacy as a carrot: incentives for data sharing with privacy guarantees and correlated records.
Tailoring procurement to achieve social outcomes: case of Wastewater treament plants in Haryana (Joint with Aditi Kharb)