Market Power and Efficiency in a Computational Electricity Market with Discriminatory Double-Auction Pricing

James Nicolaisen, Valentin Petrov and Leigh Tesfatsion ()
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James Nicolaisen: Iowa State University
Valentin Petrov: Iowa State University

Computational Economics from EconWPA

Abstract: This study reports experimental market power and efficiency outcomes for a computational wholesale electricity market operating in the short run under systematically varied concentration and capacity conditions. The pricing of electricity is determined by means of a clearinghouse double auction with discriminatory mid-point pricing. Buyers and sellers use Roth-Erev individual reinforcement learning to determine their price and quantity offers in each auction round. It is shown that market microstructure is strongly predictive for the relative market power of buyers and sellers, and that high market efficiency is generally attained. These findings are robust for tested changes in individual learning parameters. It is also shown that similar relative market power findings are obtained if the electricity buyer and seller populations instead each engage in social mimicry learning via a genetic algorithm. However, market efficiency is substantially reduced.

Keywords: Wholesale electricity market; Electricity restructuring; Double auction; Market power; Efficiency; Concentration; Capacity; Agent-based computational economics; Roth-Erev reinforcement learning; Genetic algorithm social learning. (search for similar items in EconPapers)
JEL-codes: D4 D44 D8 L1 L5 L94 C6 C9 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-evo, nep-reg and nep-tid
Date: 2000-11-11
Note: Type of Document - pdf file; prepared on IBM PC -MSWord; to print on HP/PostScript/; pages: 25 ; figures: included
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http://129.3.20.41/eps/comp/papers/0004/0004005.pdf (application/pdf)

Related works:
Working Paper: Market Power and Efficiency in a Computational Electricity Market with Discriminatory Double-Auction Pricing (2002)
Working Paper: Market Power and Efficiency in a Computational Electricity Market with Discriminatory Double-Auction Pricing (2001)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpco:0004005

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