Rational Actors in Balancing Markets: a Game-Theoretic Model and Results
Abstract
Guided by game theory we develop a model to explain behavioral equilibria under uncertainty and interaction with the spot market on balancing markets. We offer some insights for the general model and derive explicit solutions for a specific model in which the error distributions and pricing function are given. The most interesting conclusions are the unique existence of an equilibrium and that no participant acts contrary to the aggregate market (either all market participants buy or sell power) and all strategies are, normalized properly, equal (which is rather counterintuitive). Furthermore the aggregate behavior is a stochastic process varying around its own variance.Download Info
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Paper provided by Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL) in its series Publications of Darmstadt Technical University, Institute of Economics (VWL) with number 36753.Length:
Date of creation: May 2006
Date of revision:
Publication status: Published in Darmstadt Discussion Papers in Economics . 171 (2006-05)
Handle: RePEc:dar:vpaper:36753
Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/36753/
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- Catherine D. Wolfram, 1998. "Strategic Bidding in a Multiunit Auction: An Empirical Analysis of Bids to Supply Electricity in England and Wales," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 703-725, Winter.
- Bert Willems, 2004. "Cournot Competition, Financial Option markets and Efficiency," Center for Economic Studies - Discussion papers ces0414, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
- Frank Wolak, 2000. "An Empirical Analysis of the Impact of Hedge Contracts on Bidding Behavior in a Competitive Electricity Market," International Economic Journal, Korean International Economic Association, vol. 14(2), pages 1-39.
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