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Micro-economic analysis of the physical constrained markets: game theory application to competitive electricity markets

Author

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  • E. Bompard
  • Y. C. Ma
  • E. Ragazzi

Abstract

Competition has been introduced in the electricity markets with the goal of reducing prices and improving efficiency. The basic idea which stays behind this choice is that, in competitive markets, a greater quantity of the good is exchanged at a lower price, leading to higher market efficiency. Electricity markets are pretty different from other commodities mainly due to the physical constraints related to the network structure that may impact the market performance. The network structure of the system on which the economic transactions need to be undertaken poses strict physical and operational constraints. Strategic interactions among producers that game the market with the objective of maximizing their producer surplus must be taken into account when modeling competitive electricity markets. The physical constraints, specific of the electricity markets, provide additional opportunity of gaming to the market players. Game theory provides a tool to model such a context. This paper discussed the application of game theory to physical constrained electricity markets with the goal of providing tools for assessing the market performance and pinpointing the critical network constraints that may impact the market efficiency. The basic models of game theory specifically designed to represent the electricity markets will be presented. IEEE30 bus test system of the constrained electricity market will be discussed to show the network impacts on the market performances in presence of strategic bidding behavior of the producers. Copyright EDP Sciences/Società Italiana di Fisica/Springer-Verlag 2006

Suggested Citation

  • E. Bompard & Y. C. Ma & E. Ragazzi, 2006. "Micro-economic analysis of the physical constrained markets: game theory application to competitive electricity markets," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 50(1), pages 153-160, March.
    • Handle: RePEc:spr:eurphb:v:50:y:2006:i:1:p:153-160
    DOI: 10.1140/epjb/e2006-00122-1
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    Cited by:

    1. Dariusz Dudek & Marcin Lipowski & Ilona Bondos, 2021. "Changing Energy Supplier on the Market with a Strong Position of Incumbent Suppliers—Polish Example," Energies, MDPI, vol. 14(13), pages 1-16, June.
    2. Tae Hyun Yoo & Hyeongon Park & Jae-Kun Lyu & Jong-Keun Park, 2014. "Determining the Interruptible Load with Strategic Behavior in a Competitive Electricity Market," Energies, MDPI, vol. 8(1), pages 1-21, December.
    3. Joseph Mullins & Liam Wagner & John Foster, 2010. "Price Spikes in Electricity Markets: A Strategic Perspective," Energy Economics and Management Group Working Papers 05, School of Economics, University of Queensland, Australia.

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