IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Are agent-based simulations robust? The wholesale electricity trading case

Agent-based computational economics is becoming widely used in practice. This paper explores the consistency of some of its standard techniques. We focus in particular on prevailing wholesale electricity trading simulation methods. We include different supply and demand representations and propose the Experience-Weighted Attractions method to include several behavioural algorithms. We compare the results across assumptions and to economic theory predictions. The match is good under best-response and reinforcement learning but not under fictitious play. The simulations perform well under flat and upward-slopping supply bidding, and also for plausible demand elasticity assumptions. Learning is influenced by the number of bids per plant and the initial conditions. The overall conclusion is that agent-based simulation assumptions are far from innocuous. We link their performance to underlying features, and identify those that are better suited to model wholesale electricity markets.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.econ.upf.edu/docs/papers/downloads/1214.pdf
File Function: Whole Paper
Download Restriction: no

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1214.

as
in new window

Length:
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:upf:upfgen:1214
Contact details of provider: Web page: http://www.econ.upf.edu/

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.:

as in new window
  1. Alvin E. Roth & Tayfun Sonmez & M. Utku Unver, 2003. "Kidney Exchange," NBER Working Papers 10002, National Bureau of Economic Research, Inc.
  2. John B Van Huyck & Raymond C Battalio & Richard O Beil, 1997. "Tacit coordination games, strategic uncertainty, and coordination failure," Levine's Working Paper Archive 1225, David K. Levine.
  3. Nicolaisen, James & Petrov, Valentin & Tesfatsion, Leigh S., 2001. "Market Power and Efficiency in a Computational Electricity Market with Discriminatory Double-Auction Pricing," Staff General Research Papers 2050, Iowa State University, Department of Economics.
  4. Von der Fehr, N.H.M. & Harbord, D., 1992. "Spot Market Competition in the UK Electricity Industry," Memorandum 09/1992, Oslo University, Department of Economics.
  5. Sebastien Pouget, 2007. "Adaptive Traders and the Design of Financial Markets," Journal of Finance, American Finance Association, vol. 62(6), pages 2835-2863, December.
  6. Bolle, Friedel, 1992. "Supply function equilibria and the danger of tacit collusion : The case of spot markets for electricity," Energy Economics, Elsevier, vol. 14(2), pages 94-102, April.
  7. Crawford, Gregory S. & Crespo, Joseph & Tauchen, Helen, 2007. "Bidding asymmetries in multi-unit auctions: Implications of bid function equilibria in the British spot market for electricity," International Journal of Industrial Organization, Elsevier, vol. 25(6), pages 1233-1268, December.
  8. Green, Richard & Newbery, David M G, 1991. "Competition in the British Electricity Spot Market," CEPR Discussion Papers 557, C.E.P.R. Discussion Papers.
  9. Roth, Alvin E. & Erev, Ido, 1995. "Learning in extensive-form games: Experimental data and simple dynamic models in the intermediate term," Games and Economic Behavior, Elsevier, vol. 8(1), pages 164-212.
  10. Natalia Fabra & Nils‐Henrik Fehr & David Harbord, 2006. "Designing electricity auctions," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 23-46, 03.
  11. Tesfatsion, Leigh & Judd, Kenneth L., 2006. "Handbook of Computational Economics, Vol. 2: Agent-Based Computational Economics," Staff General Research Papers 10368, Iowa State University, Department of Economics.
  12. Jerker Denrell, 2004. "Random Walks and Sustained Competitive Advantage," Management Science, INFORMS, vol. 50(7), pages 922-934, July.
  13. Blumsack, Seth & Perekhodtsev, Dmitri & Lave, Lester B., 2002. "Market Power in Deregulated Wholesale Electricity Markets: Issues in Measurement and the Cost of Mitigation," The Electricity Journal, Elsevier, vol. 15(9), pages 11-24, November.
  14. Marks, Robert, 2006. "Market Design Using Agent-Based Models," Handbook of Computational Economics, in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 27, pages 1339-1380 Elsevier.
  15. John Duffy, 2004. "Agent-Based Models and Human Subject Experiments," Computational Economics 0412001, EconWPA.
  16. John Bower & Derek W. Bunn, 2000. "Model-Based Comparisons of Pool and Bilateral Markets for Electricity," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 1-29.
  17. Sun, Junjie & Tesfatsion, Leigh S., 2006. "Dynamic Testing of Wholesale Power Market Designs: An Open-Source Agent-Based Framework," Staff General Research Papers 12649, Iowa State University, Department of Economics.
  18. Bunn, Derek W. & Martoccia, Maria, 2005. "Unilateral and collusive market power in the electricity pool of England and Wales," Energy Economics, Elsevier, vol. 27(2), pages 305-315, March.
  19. Matteo Richiardi & Roberto Leombruni & Nicole J. Saam & Michele Sonnessa, 2006. "A Common Protocol for Agent-Based Social Simulation," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 9(1), pages 15.
  20. Rothkopf, Michael H., 2002. "Control of Market Power in Electricity Auctions," The Electricity Journal, Elsevier, vol. 15(8), pages 15-24, October.
  21. Li, Hongyan & Sun, Junjie & Tesfatsion, Leigh S., 2009. "Separation and Volatility of Locational Marginal Prices in Restructured Wholesale Power Markets," Staff General Research Papers 13075, Iowa State University, Department of Economics.
  22. Klemperer, Paul D & Meyer, Margaret A, 1989. "Supply Function Equilibria in Oligopoly under Uncertainty," Econometrica, Econometric Society, vol. 57(6), pages 1243-77, November.
  23. Fama, Eugene F & MacBeth, James D, 1973. "Risk, Return, and Equilibrium: Empirical Tests," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 607-36, May-June.
  24. Colin Camerer & Teck-Hua Ho, 1999. "Experience-weighted Attraction Learning in Normal Form Games," Econometrica, Econometric Society, vol. 67(4), pages 827-874, July.
  25. Erev, Ido & Roth, Alvin E, 1998. "Predicting How People Play Games: Reinforcement Learning in Experimental Games with Unique, Mixed Strategy Equilibria," American Economic Review, American Economic Association, vol. 88(4), pages 848-81, September.
  26. Bushnell, James & Wolfram, Catherine, 2008. "Electricity Markets," Staff General Research Papers 31547, Iowa State University, Department of Economics.
  27. Holmberg, Par, 2008. "Unique supply function equilibrium with capacity constraints," Energy Economics, Elsevier, vol. 30(1), pages 148-172, January.
  28. repec:rje:randje:v:37:y:2006:1:p:23-46 is not listed on IDEAS
  29. Weidlich, Anke & Veit, Daniel, 2008. "A critical survey of agent-based wholesale electricity market models," Energy Economics, Elsevier, vol. 30(4), pages 1728-1759, July.
  30. Alvin E. Roth, 2002. "The Economist as Engineer: Game Theory, Experimentation, and Computation as Tools for Design Economics," Econometrica, Econometric Society, vol. 70(4), pages 1341-1378, July.
  31. Michael H. Rothkopf & Aleksandar Peke\v{c} & Ronald M. Harstad, 1998. "Computationally Manageable Combinational Auctions," Management Science, INFORMS, vol. 44(8), pages 1131-1147, August.
  32. Robert Marks, 2007. "Validating Simulation Models: A General Framework and Four Applied Examples," Computational Economics, Society for Computational Economics, vol. 30(3), pages 265-290, October.
  33. Bower, John & Bunn, Derek, 2001. "Experimental analysis of the efficiency of uniform-price versus discriminatory auctions in the England and Wales electricity market," Journal of Economic Dynamics and Control, Elsevier, vol. 25(3-4), pages 561-592, March.
  34. Jan W. Rivkin & Nicolaj Siggelkow, 2003. "Balancing Search and Stability: Interdependencies Among Elements of Organizational Design," Management Science, INFORMS, vol. 49(3), pages 290-311, March.
  35. Micola, Augusto Rupérez & Banal-Estañol, Albert & Bunn, Derek W., 2008. "Incentives and coordination in vertically related energy markets," Journal of Economic Behavior & Organization, Elsevier, vol. 67(2), pages 381-393, August.
  36. Thomas Brenner, 2004. "Agent Learning Representation - Advice in Modelling Economic Learning," Papers on Economics and Evolution 2004-16, Philipps University Marburg, Department of Geography.
  37. G. Fagiolo & C. Birchenhall & P. Windrum, 2007. "Empirical Validation in Agent-based Models: Introduction to the Special Issue," Computational Economics, Society for Computational Economics, vol. 30(3), pages 189-194, October.
  38. Day, Christopher J & Bunn, Derek W, 2001. "Divestiture of Generation Assets in the Electricity Pool of England and Wales: A Computational Approach to Analyzing Market Power," Journal of Regulatory Economics, Springer, vol. 19(2), pages 123-41, March.
  39. Ron Adner & Daniel Levinthal, 2001. "Demand Heterogeneity and Technology Evolution: Implications for Product and Process Innovation," Management Science, INFORMS, vol. 47(5), pages 611-628, May.
  40. Bower, John & Bunn, Derek W. & Wattendrup, Claus, 2001. "A model-based analysis of strategic consolidation in the German electricity industry," Energy Policy, Elsevier, vol. 29(12), pages 987-1005, October.
  41. Bunn, Derek W. & Oliveira, Fernando S., 2007. "Agent-based analysis of technological diversification and specialization in electricity markets," European Journal of Operational Research, Elsevier, vol. 181(3), pages 1265-1278, September.
  42. Midgley, David & Marks, Robert & Kunchamwar, Dinesh, 2007. "Building and assurance of agent-based models: An example and challenge to the field," Journal of Business Research, Elsevier, vol. 60(8), pages 884-893, August.
  43. Thomas H. Noe & Michael J. Rebello & Jun Wang, 2003. "Corporate Financing: An Artificial Agent-based Analysis," Journal of Finance, American Finance Association, vol. 58(3), pages 943-973, 06.
  44. Ido Erev & Alvin Roth & Robert Slonim & Greg Barron, 2007. "Learning and equilibrium as useful approximations: Accuracy of prediction on randomly selected constant sum games," Economic Theory, Springer, vol. 33(1), pages 29-51, October.
  45. Bunn, Derek W. & Day, Christopher J., 2009. "Computational modelling of price formation in the electricity pool of England and Wales," Journal of Economic Dynamics and Control, Elsevier, vol. 33(2), pages 363-376, February.
  46. Par Holmberg, 2007. "Supply Function Equilibrium with Asymmetric Capacities and Constant Marginal Costs," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 55-82.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:upf:upfgen:1214. 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: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.