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Capacity expansion under uncertainty in an oligopoly using indirect reinforcement-learning

Fernando S. Oliveira and Manuel L.G. Costa

European Journal of Operational Research, 2018, vol. 267, issue 3, 1039-1050

Abstract: We model capacity expansion in oligopolistic markets, with endogenous prices, under uncertainty, considering multiple production technologies. As this environment is complex, capacity expansion is the outcome of a learning process by individual firms. We propose indirect reinforcement-learning to model the interaction between price determination and capacity decisions, in the context of an oligopoly game. We apply our model to the analysis of the Iberian electricity market, considering multiple technologies, focusing on how subsidies, the prices of CO2 emissions and gas affect the capacity expansion policies.

Keywords: OR in energy; Capacity expansion; Computational learning; Electricity markets; Oligopoly (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:ejores:v:267:y:2018:i:3:p:1039-1050