The invisible polluter: Can regulators save consumer surplus?
Consider an electricity market populated by competitive agents using thermal generating units. Such generation involves the emission of pollutants, on which a regulator might impose constraints. Transmission capacities for sending energy may naturally be restricted by the grid facilities. Both pollution standards and trans mission capacities can impose several constraints upon the joint strategy space of the agents. We propose a coupled constraints equilibrium as a solution to the regulator’s problem of avoiding both congestion and excessive pollution. Using the coupled constraints’ Lagrange multipliers as taxation coeﬃcients the regulator can compel the agents to obey the multiple constraints. However, for this modiﬁcation of the players’ payoﬀs to induce the required behaviour a coupled constraints equilibrium needs to exist and must also be unique. A three-node market example with a dc model of the transmission line constraints described in  and  possesses these properties. We extend it here to utilise a two-period load duration curve and, in result, obtain a two-period game. The implications of the game solutions obtained for several weights, which the regulator can use to vary the level of generators’ responsibilities for the constraints’ satisfaction, for consumer and producer surpluses will be discussed.
|Date of creation:||30 Jun 2008|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Krawczyk, Jacek & Zuccollo, James, 2006. "NIRA-3: An improved MATLAB package for finding Nash equilibria in infinite games," MPRA Paper 1119, University Library of Munich, Germany.
- Jacek B. Krawczyk & Steffan Berridge, 1997.
"Relaxation Algorithms in Finding Nash Equilibria,"
- Krawczyk, Jacek B., 2005. "Coupled constraint Nash equilibria in environmental games," Resource and Energy Economics, Elsevier, vol. 27(2), pages 157-181, June.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:9890. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.