Testing Institutional Arrangements Via Agent-Based Modeling: A U.S. Electricity Market Example

Hongyan Li, Junjie Sun and Leigh Tesfatsion ()

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: Many critical goods and services in modern-day economies are produced and distributed through complex institutional arrangements. Agent-based computational economics (ACE) modeling tools are capable of handling this degree of complexity. In concrete support of this claim, this study presents an ACE test bed designed to permit the exploratory study of restructured U.S. wholesale power markets with transmission grid congestion managed by locational marginal prices (LMPs). Illustrative findings are presented showing how spatial LMP cross-correlation patterns vary systematically in response to changes in the price responsiveness of wholesale power demand when wholesale power sellers have learning capabilities. These findings highlight several distinctive features of ACE modeling: namely, an emphasis on process rather than on equilibrium; an ability to capture complicated structural, institutional, and behavioral real-world aspects (micro-validation); and an ability to study the effects of changes in these aspects on spatial and temporal outcome distributions.

Keywords: Institutional Design; agent-based computational economics; U.S. Electricity Market; Locational marginal pricing; Spatial Cross-Correlations; AMES Test Bed (search for similar items in EconPapers)
JEL-codes: C6 D4 D6 L1 L3 L94 Q4 (search for similar items in EconPapers)
Date: 2010-01-11
New Economics Papers: this item is included in nep-cmp and nep-ene
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Citations: View citations in EconPapers (3)

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Working Paper: Testing institutional arrangements via agent-based modeling: a U.S. electricity market example (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:13155

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