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Perfectly competitive capacity expansion games with risk-averse participants

Author

Listed:
  • Dane A. Schiro

    (University of Illinois at Urbana-Champaign
    ISO New England)

  • Benjamin F. Hobbs

    (The Johns Hopkins University)

  • Jong-Shi Pang

    (University of Illinois at Urbana-Champaign
    University of Southern California)

Abstract

This paper presents Nash equilibrium models of perfectly competitive capacity expansion involving risk-averse participants in the presence of state uncertainty and pricing mechanisms. Existence of solutions to such models is established based on the nonlinear complementarity formulations of the models to which a general existence result is applicable. This study extends two recent papers (Fan et al. in J Environ Econ Manag 60:193–208, 2010; Zhao et al. in Oper Res 58:529–548, 2010) pertaining to special cases of our models, complements the extensive work on games with strategic players, and provides an extended treatment of games with price-taking players whose feasible sets may be unbounded. The latter aspect generalizes much of the classical analysis of such models for which price boundedness and feasible region compactness are essential assumptions needed for a fixed-point existence proof.

Suggested Citation

  • Dane A. Schiro & Benjamin F. Hobbs & Jong-Shi Pang, 2016. "Perfectly competitive capacity expansion games with risk-averse participants," Computational Optimization and Applications, Springer, vol. 65(2), pages 511-539, November.
    • Handle: RePEc:spr:coopap:v:65:y:2016:i:2:d:10.1007_s10589-015-9798-5
    DOI: 10.1007/s10589-015-9798-5
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    4. Bichuch, Maxim & Hobbs, Benjamin F. & Song, Xinyue, 2023. "Identifying optimal capacity expansion and differentiated capacity payments under risk aversion and market power: A financial Stackelberg game approach," Energy Economics, Elsevier, vol. 120(C).

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