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Raiffa-Kalai-Smorodinsky Bargaining Solution for Bilateral Contracts in Electricity Markets

Author

Listed:
  • Reinaldo Crispiniano Garcia

    (Industrial Engineering Department, University of Brasilia, Brasilia 70910-900, DF, Brazil)

  • Javier Contreras

    (E.T.S. de Ingeniería Industrial, University of Castilla-La Mancha, 13071 Ciudad Real, Spain)

  • Matheus de Lima Barbosa

    (School of Computing and Information, University of Pittsburgh, Pittsburgh, PA 15260, USA)

  • Felipe Silva Toledo

    (Department of Mathematics, London School of Economics and Political Science, London WC2A 2AE, UK)

  • Paulo Vinicius Aires da Cunha

    (Falconi Consultores S.A., Brasilia 70306-000, DF, Brazil)

Abstract

In electricity markets, bilateral contracts (BC) are used to hedge against price volatility in the spot market. Pricing these contracts requires scheduling from either the buyer or the seller aiming to achieve the highest profit possible. Since this problem includes different players, a Generation Company (GC) and an Electricity Supplier Company (ESC) are considered. The approaches to solve this problem include the Nash Bargaining Solution (NBS) equilibrium and the Raiffa–Kalai–Smorodinsky (RKS) bargaining solution. The innovation of this work is the implementation of an algorithm based on the RKS equilibrium to find a compromise strategy when determining the concessions to be made by the parties. The results are promising and show that the RKS approach can obtain better results compared to the Nash equilibrium method applied to a case study.

Suggested Citation

  • Reinaldo Crispiniano Garcia & Javier Contreras & Matheus de Lima Barbosa & Felipe Silva Toledo & Paulo Vinicius Aires da Cunha, 2020. "Raiffa-Kalai-Smorodinsky Bargaining Solution for Bilateral Contracts in Electricity Markets," Energies, MDPI, vol. 13(9), pages 1-14, May.
    • Handle: RePEc:gam:jeners:v:13:y:2020:i:9:p:2397-:d:356713
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    References listed on IDEAS

    as
    1. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
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    Cited by:

    1. Qi Feng & Yuanchen Li & J. George Shanthikumar, 2022. "Negotiations in Competing Supply Chains: The Kalai-Smorodinsky Bargaining Solution," Management Science, INFORMS, vol. 68(8), pages 5868-5890, August.

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