Raiffa-Kalai-Smorodinsky Bargaining Solution for Bilateral Contracts in Electricity Markets

Reinaldo Crispiniano Garcia, Javier Contreras, Matheus de Lima Barbosa, Felipe Silva Toledo and Paulo Vinicius Aires da Cunha
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Reinaldo Crispiniano Garcia: Industrial Engineering Department, University of Brasilia, Brasilia 70910-900, DF, Brazil
Javier Contreras: E.T.S. de Ingeniería Industrial, University of Castilla-La Mancha, 13071 Ciudad Real, Spain
Matheus de Lima Barbosa: School of Computing and Information, University of Pittsburgh, Pittsburgh, PA 15260, USA
Felipe Silva Toledo: Department of Mathematics, London School of Economics and Political Science, London WC2A 2AE, UK
Paulo Vinicius Aires da Cunha: Falconi Consultores S.A., Brasilia 70306-000, DF, Brazil

Energies, 2020, vol. 13, issue 9, 1-14

Abstract: In electricity markets, bilateral contracts (BC) are used to hedge against price volatility in the spot market. Pricing these contracts requires scheduling from either the buyer or the seller aiming to achieve the highest profit possible. Since this problem includes different players, a Generation Company (GC) and an Electricity Supplier Company (ESC) are considered. The approaches to solve this problem include the Nash Bargaining Solution (NBS) equilibrium and the Raiffa–Kalai–Smorodinsky (RKS) bargaining solution. The innovation of this work is the implementation of an algorithm based on the RKS equilibrium to find a compromise strategy when determining the concessions to be made by the parties. The results are promising and show that the RKS approach can obtain better results compared to the Nash equilibrium method applied to a case study.

Keywords: electricity market; bilateral contracts; Raiffa–Kalai–Smorodinsky bargaining solution; game theory (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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