Multidimensional Forward Contracts Under Uncertainty for Electricity Markets

We consider mechanism design problems for strategic agents with multi-dimensional private information and uncertainty in their utility/cost function. We show that the optimal mechanism with firm allocation can be implemented as a nonlinear pricing scheme, and the optimal mechanism with random allocation can be implemented as a menu of nonlinear pricing schemes. We provide two examples to demonstrate the results: 1) an optimal energy procurement mechanism from a strategic seller with renewable (random) generation, and 2) the design of an optimal demand response program for a network of heterogeneous loads.

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