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Forming Rate Options for Various Types of Consumers in the Retail Electricity Market by Solving the Adverse Selection Problem

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  • Natalia Aizenberg
  • Elena Stashkevich
  • Nikolai Voropai

Abstract

This paper is concerned with the game theoretic mechanisms of interaction between a load serving entity and several types of power consumers (with elastic and inelastic demand). The main focus is on the bounded rational and fully rational consumers, and respective utility functions are defined for them. The demand-side management (DSM) principles are used to analyze the load at different times of the day for different types of consumers. The proposed statement allows the formulation of coordinated prices in rates for different types of consumers, and optimization of demand: peak load decreases relative to a daily average one. The problem is reduced to a convex optimization problem that has a unique solution in the presented form. The obtained result is in the form of a separating equilibrium (when different consumers choose different rates), which brings the retail market equilibrium closer to the maximum public welfare.

Suggested Citation

  • Natalia Aizenberg & Elena Stashkevich & Nikolai Voropai, 2019. "Forming Rate Options for Various Types of Consumers in the Retail Electricity Market by Solving the Adverse Selection Problem," International Journal of Public Administration, Taylor & Francis Journals, vol. 42(15-16), pages 1349-1362, December.
    • Handle: RePEc:taf:lpadxx:v:42:y:2019:i:15-16:p:1349-1362
    DOI: 10.1080/01900692.2019.1669052
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