Using data from Alberta’s wholesale electricity market, we demonstrate the challenges that can arise when characterizing a firm’s unilateral expected profit-maximizing offer curve. We illustrate that the residual demand curves faced by firms can be highly non-linear, resulting in non-monotonic, downward sloping, optimal best-response offer curves violating common restrictions imposed on bidding behavior. This can have important implications on the conclusions drawn from such empirical analyses. We identify features of residual demand curves that can lead to these problems, providing guidance to researchers utilizing these methods. We find that a simplified monotonic smoothing of the unconstrained ex-post optimal offer curve can achieve the majority of the expected profits, offering an alternative to calculating the ex-ante expected profit-maximizing offer curve that can be computationally burdensome.

使用来自艾伯塔省电力批发市场的数据，我们证明了在描绘公司单边预期利润最大化报价曲线时可能出现的挑战。我们说明，企业面临的剩余需求曲线可能是高度非线性的，从而导致非单调，向下倾斜，最优的最佳响应报价曲线违反了对投标行为施加的常见限制。这可能对从这些经验分析得出的结论产生重要影响。我们确定了可能导致这些问题的剩余需求曲线特征，为使用这些方法的研究人员提供了指导。我们发现无约束的事后简化的单调平滑最优报价曲线可以实现大部分预期利润，从而提供了一种计算超出预期范围的预期利润最大化报价曲线的替代方法。