A mean field game model for optimal trading in the intraday electricity market

Sema Coskun () and Ralf Korn ()
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Sema Coskun: RPTU Kaiserslautern-Landau
Ralf Korn: RPTU Kaiserslautern-Landau

Decisions in Economics and Finance, 2025, vol. 48, issue 1, No 15, 269-299

Abstract: Abstract In this study, we provide a simple one period mean-field-games setting for the joint optimal trading problem for electricity producers in the electricity markets. Based on the Markowitz mean-variance approach from stock trading, we consider a decision problem of an electricity provider when determining the optimal fractions of production that should be traded in the day-ahead and in the intraday markets. Moreover, all such providers are related by a ranking criterion and each one wants to perform as good as possible in this ranking. We first start with a simple model where only the price risk in the intraday market is present and subsequently extend the problem to the cases involving either production and/or demand uncertainty. The key technique is to reduce the optimality conditions to a first order non-linear ordinary differential equation. We will illustrate our findings by various numerical examples. Our findings will in particular be important for electricity producers using renewable resources.

Keywords: Mean-field games; Optimal trading; Electricity markets; Primary 49N80 91A16; Secondary 91G10 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10203-024-00445-1

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