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Prediction Markets to Forecast Electricity Demand

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Abstract

Forecasting electricity demand for future years is an essential step in resource planning. A common approach is for the system operator to predict future demand from the estimates of individual distribution companies. However, the predictions thus obtained may be of poor quality, since the reporting incentives are unclear. We propose a prediction market as a form of forecasting future demand for electricity. We describe how to implement a simple prediction market for continuous variables, using only contracts based on binary variables. We also discuss specific issues concerning the implementation of such a market.

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File URL: http://www.cramton.umd.edu/papers2005-2009/castro-cramton-prediction-markets-for-electricity.pdf
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Bibliographic Info

Paper provided by University of Maryland, Department of Economics - Peter Cramton in its series Papers of Peter Cramton with number 09ccpre.

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Length: 20 pages
Date of creation: 2012
Date of revision: 2012
Publication status: Published in Working Paper, University of Maryland, August 2009
Handle: RePEc:pcc:pccumd:09ccpre

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Postal: Economics Department, University of Maryland, College Park, MD 20742-7211
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Fax: (202) 318-0520
Web page: http://www.cramton.umd.edu

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Keywords: electricity market design; prediction markets;

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  1. Berg, Joyce E. & Nelson, Forrest D. & Rietz, Thomas A., 2008. "Prediction market accuracy in the long run," International Journal of Forecasting, Elsevier, Elsevier, vol. 24(2), pages 285-300.
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