Why build energy models as MCPs? An economic perspective

Frederic Murphy and Axel Pierru

Discussion Papers from King Abdullah Petroleum Studies and Research Center

Abstract: The discipline of microeconomics focuses on the outcomes of the actions of economic agents, where economic agents can be individuals as producers and consumers or organizations that deliver goods or services. Microeconomists have developed a collection of models to understand and represent these behaviors. Mixed Complementarity Problems (MCPs) are among the most recent such models. This paper addresses the community of energy economists who are not necessarily focused on modeling but want to know more about current methods for representing economic equilibria. We describe in non-mathematical terms the advantages of using MCPs over other representations of markets and how to decide when they should be preferred to a more traditional (and possibly simpler) optimization approach such as linear programming.

Keywords: Energy Models; KAPSARC Energy Model (KEM); Linear Programming; Microeconomic Models; Mixed Complimentarity Problem (MCP) Model; Mixed Complimentary Problems (MCPs); Partial Equilibrium Models (search for similar items in EconPapers)
Pages: 24
Date: 2015-01-06
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Persistent link: https://EconPapers.repec.org/RePEc:prc:dpaper:ks-1513-dp07a

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