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Congestion Management Games in Electricity Markets

Author

Listed:
  • Karl-Martin Ehrhart
  • Anselm Eicke
  • Lion Hirth
  • Fabian Ocker
  • Marion Ott
  • Ingmar Schlecht
  • Runxi Wang

Abstract

This paper proposes a game-theoretic model to analyze the strategic behavior of inc-dec gaming in market-based congestion management (redispatch). We extend existing models by considering incomplete information about competitors’ costs and a finite set of providers. We find that inc-dec gaming is also a rational behavior in markets with high competition and with uncertainty about network constraints. Such behavior already occurs in our setup of two regions. Comparing market-based redispatch with three theoretical benchmarks highlights a lower efficiency level of market-based redispatch and inflated redispatch payments. Finally, we study seven variations of our basic model to assess whether different market fundamentals or market design changes mitigate inc-dec gaming. None of these variations eliminates inc-dec gaming entirely. JEL Classification: D43 Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection; D44 Auctions; L13 Oligopoly and Other Imperfect Markets; Q41 Energy: Demand and Supply; Prices; Q48 Energy: Government Policy

Suggested Citation

  • Karl-Martin Ehrhart & Anselm Eicke & Lion Hirth & Fabian Ocker & Marion Ott & Ingmar Schlecht & Runxi Wang, 2026. "Congestion Management Games in Electricity Markets," The Energy Journal, , vol. 47(1), pages 77-108, January.
    • Handle: RePEc:sae:enejou:v:47:y:2026:i:1:p:77-108
    DOI: 10.1177/01956574251365606
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    Cited by:

    1. is not listed on IDEAS
    2. Bucksteeg, Michael & Voswinkel, Simon & Blumberg, Gerald, 2023. "Improving flow-based market coupling by integrating redispatch potential - Evidence from a large-scale model," EconStor Preprints 270878, ZBW - Leibniz Information Centre for Economics.
    3. Bucksteeg, Michael & Voswinkel, Simon & Blumberg, Gerald, 2024. "Improving flow-based market coupling by integrating redispatch potential―Evidence from a large-scale model," Energy Policy, Elsevier, vol. 188(C).
    4. Ehrhart, Karl-Martin & Eicke, Anselm & Hirth, Lion & Ocker, Fabian & Ott, Marion & Schlecht, Ingmar & Wang, Runxi, 2025. "Analysis of a capacity-based redispatch mechanism," Energy Economics, Elsevier, vol. 149(C).

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    Keywords

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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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