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Why build energy models as MCPs? An economic perspective

Author

Listed:
  • Frederic Murphy
  • Axel Pierru

    (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.

Suggested Citation

  • Frederic Murphy & Axel Pierru, 2015. "Why build energy models as MCPs? An economic perspective," Discussion Papers ks-1513-dp07a, King Abdullah Petroleum Studies and Research Center.
    • Handle: RePEc:prc:dpaper:ks-1513-dp07a
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