Optimal price management in retail energy markets: an impulse control problem with asymptotic estimates

Matteo Basei ()
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Matteo Basei: University of California, Berkeley

Mathematical Methods of Operations Research, 2019, vol. 89, issue 3, No 2, 355-383

Abstract: Abstract We consider a retailer who buys energy in the wholesale market and resells it to final consumers. The retailer has to decide when to intervene to change the price he asks to his customers, in order to maximize his income. We model the problem as an infinite-horizon stochastic impulse control problem. We characterize an optimal price strategy and provide analytical existence results for the equations involved. We then investigate the dependence on the intervention cost. In particular, we prove that the measure of the continuation region is asymptotic to the fourth root of the cost. Finally, we provide some numerical results and consider a suitable extension of the model.

Keywords: Impulse controls; Quasi-variational inequality; Asymptotic estimates; Price management; Energy markets; 93E20; 91B70; 91B24 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (6)

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DOI: 10.1007/s00186-019-00665-x

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