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Increase-Decrease Game under Imperfect Competition in Two-stage Zonal Power Markets Part II: Solution Algorithm

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  • Sarfatia, M.
  • M., Hesamzadeha.
  • Holmberg, P.

Abstract

In part I of this paper, we proposed a Mixed-Integer Linear Program (MILP) to analyse imperfect competition of oligopoly producers in two-stage zonal power markets. In part II of this paper, we propose a solution algorithm which decomposes the proposed MILP model into several subproblems and solve them in parallel and iteratively. Our solution algorithm reduces the solution time of the MILP model and it allows us to analyze largescale examples. To tackle the multiple Subgame Perfect Nash Equilibria (SPNE) situation, we propose a SPNE-band approach. The SPNE band is split into several subintervals and the proposed solution algorithm finds a representative SPNE in each subinterval. Each subinterval is independent from each other, so this structure enables us to use parallel computing. We also design a pre-feasibility test to identify the subintervals without SPNE. Our proposed solution algorithm and our SPNE-band approach are demonstrated on the 6-node and the modified IEEE 30-node example systems. The computational tractability of our solution algorithm is illustrated for the IEEE 118-node and 300-node systems.

Suggested Citation

  • Sarfatia, M. & M., Hesamzadeha. & Holmberg, P., 2018. "Increase-Decrease Game under Imperfect Competition in Two-stage Zonal Power Markets Part II: Solution Algorithm," Cambridge Working Papers in Economics 1870, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:1870
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    References listed on IDEAS

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    1. Victor DeMiguel & Huifu Xu, 2009. "A Stochastic Multiple-Leader Stackelberg Model: Analysis, Computation, and Application," Operations Research, INFORMS, vol. 57(5), pages 1220-1235, October.
    2. Sarfati, Mahir & Hesamzadeh, Mohammad Reza & Holmberg, Pär, 2018. "Increase-Decrease Game under Imperfect Competition in Two-stage Zonal Power Markets –​ Part II: Solution Algorithm," Working Paper Series 1254, Research Institute of Industrial Economics.
    3. M. Sarfati & M.R. Hesamzadeh & P. Holmberg, 2018. "Increase-Decrease Game under Imperfect Competition in Two-stage Zonal Power Markets – Part II: Solution Algorithm," Working Papers EPRG 1838, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    4. RUIZ, Carlos & CONEJO, Antonio J. & SMEERS, Yves, 2012. "Equilibria in an oligopolistic electricity pool with stepwise offer curves," LIDAM Reprints CORE 2395, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Dali Zhang & Huifu Xu & Yue Wu, 2010. "A two stage stochastic equilibrium model for electricity markets with two way contracts," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 71(1), pages 1-45, February.
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    Cited by:

    1. Sarfati, M. & Hesamzadeh, M-R. & Holmberg, P., 2019. "Production efficiency of nodal and zonal pricing in imperfectly competitive electricity markets," Cambridge Working Papers in Economics 1919, Faculty of Economics, University of Cambridge.
    2. M. Sarfati & M.R. Hesamzadeh & P. Holmberg, 2018. "Increase-Decrease Game under Imperfect Competition in Two-stage Zonal Power Markets – Part II: Solution Algorithm," Working Papers EPRG 1838, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    3. Holmberg, Pär & Tangerås, Thomas & Ahlqvist, Victor, 2018. "Central- versus Self-Dispatch in Electricity Markets," Working Paper Series 1257, Research Institute of Industrial Economics, revised 27 Mar 2019.
    4. Sarfati, Mahir & Hesamzadeh, Mohammad Reza & Holmberg, Pär, 2018. "Increase-Decrease Game under Imperfect Competition in Two-stage Zonal Power Markets –​ Part II: Solution Algorithm," Working Paper Series 1254, Research Institute of Industrial Economics.

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    More about this item

    Keywords

    Modified Benders decomposition; Multiple Subgame Perfect Nash equilibria; Parallel computing; Wholesale electricity market; Zonal pricing;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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