Electricity Prices in a Game Theory Context

Mireille Bossy, Nadia Maïzi, Geert Jan Olsder, Odile Pourtallier and Etienne Tanré

Chapter Chapter 7 in Dynamic Games: Theory and Applications, 2005, pp 135-159 from Springer

Abstract: Abstract We consider a model of an electricity market in which S suppliers offer electricity: each supplier Si offers a maximum quantity qi at a fixed price pi. The response of the market to these offers is the quantities bought from the suppliers. The objective of the market is to satisfy its demand at minimal price. We investigate two cases. In the first case, each of the suppliers strives to maximize its market share on the market; in the second case each supplier strives to maximize its profit. We show that in both cases some Nash equilibrium exists. Nevertheless a close analysis of the equilibrium for profit maximization shows that it is not realistic. This raises the difficulty to predict the behavior of a market where the suppliers are known to be mainly interested by profit maximization.

Keywords: Nash Equilibrium; Market Share; Electricity Market; Electricity Price; Unit Price (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-0-387-24602-4_7

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DOI: 10.1007/0-387-24602-9_7

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