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Rational Actors in Balancing Markets: a Game-Theoretic Model and Results

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  • Rupp, Thomas

Abstract

Guided by game theory we develop a model to explain behavioral equilibria under uncertainty and interaction with the spot market on balancing markets. We offer some insights for the general model and derive explicit solutions for a specific model in which the error distributions and pricing function are given. The most interesting conclusions are the unique existence of an equilibrium and that no participant acts contrary to the aggregate market (either all market participants buy or sell power) and all strategies are, normalized properly, equal (which is rather counterintuitive). Furthermore the aggregate behavior is a stochastic process varying around its own variance.

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  • Rupp, Thomas, 2006. "Rational Actors in Balancing Markets: a Game-Theoretic Model and Results," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 36753, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    • Handle: RePEc:dar:wpaper:36753
    Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/36753/
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    1. Daniel De Wolf & Yves Smeers, 1997. "A Stochastic Version of a Stackelberg-Nash-Cournot Equilibrium Model," Management Science, INFORMS, vol. 43(2), pages 190-197, February.
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    3. De Wolf, D. & Smeers, Y., 1997. "A stochastic version of a Stackelberg-Nash-Cournot equilibrium model," LIDAM Reprints CORE 1257, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Frank Wolak, 2000. "An Empirical Analysis of the Impact of Hedge Contracts on Bidding Behavior in a Competitive Electricity Market," International Economic Journal, Taylor & Francis Journals, vol. 14(2), pages 1-39.
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