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The value of information in electricity investment games

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  • Oliveira, Fernando

Abstract

In this paper we look at the assumptions behind a Cournot model of investment in electricity markets. We analyze how information influences investment, looking at the way common knowledge of marginal costs, expectations on the competitors' marginal costs, expectations on the level and duration of demand, and conjectures on the others' behavior, influence the value of a project. We expose how the results are highly dependent on the assumptions used, and how the investment Nash-Cournot game with perfect and complete information implies such a degree of coordination between players that the outcome of the game would be classified by any regulation law as collusive behavior. Furthermore, we introduce the concept of Nash Value of Complete Information. As an example we use a stylized model of investment in liberalized electricity markets.

Suggested Citation

  • Oliveira, Fernando, 2008. "The value of information in electricity investment games," Energy Policy, Elsevier, vol. 36(7), pages 2364-2375, July.
    • Handle: RePEc:eee:enepol:v:36:y:2008:i:7:p:2364-2375
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    References listed on IDEAS

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    Cited by:

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    3. Oliveira, Fernando S. & Costa, Manuel L.G., 2018. "Capacity expansion under uncertainty in an oligopoly using indirect reinforcement-learning," European Journal of Operational Research, Elsevier, vol. 267(3), pages 1039-1050.
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    6. Baringo, L. & Conejo, A.J., 2011. "Wind power investment within a market environment," Applied Energy, Elsevier, vol. 88(9), pages 3239-3247.

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