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Behavioural simulations in spot electricity markets

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  • Banal-Estañol, Albert
  • Rupérez Micola, Augusto

Abstract

We study the consistency of behavioural simulation methods used to model the operations of wholesale electricity markets. We include different supply and demand representations and propose the Experience-Weighted Attractions method (Camerer and Ho, 1999) to encompass several behavioural paradigms. We compare the results across assumptions and to standard economic theory predictions. The match is good under flat and upward-slopping supply bidding, and also for plausible demand elasticity assumptions. Learning is influenced by the number of bids per plant and the initial conditions. The simulations perform best under reinforcement learning, less well under best-response and especially poorly under fictitious play. The overall conclusion is that simulation assumptions are far from innocuous. We link their performance to underlying features, and identify those that are better suited to model liberalised electricity markets.

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Bibliographic Info

Article provided by Elsevier in its journal European Journal of Operational Research.

Volume (Year): 214 (2011)
Issue (Month): 1 (October)
Pages: 147-159

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Handle: RePEc:eee:ejores:v:214:y:2011:i:1:p:147-159

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Web page: http://www.elsevier.com/locate/eor

Related research

Keywords: Behavioural simulations Electricity auctions Market design Experience-weighted attraction (EWA) Learning from metadata;

References

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Cited by:
  1. Kimbrough, Steven O. & Murphy, Frederic H., 2013. "Strategic bidding of offer curves: An agent-based approach to exploring supply curve equilibria," European Journal of Operational Research, Elsevier, vol. 229(1), pages 165-178.
  2. Jean-Luc Gaffard & Mauro Napoletano, 2012. "Agent-based models and economic policy," Sciences Po publications info:hdl:2441/53r60a8s3ku, Sciences Po.
  3. repec:spo:wpecon:info:hdl:2441/53r60a8s3kup1vc9l564igg8g is not listed on IDEAS

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