Evaluating Individual Market Power in Electricity Markets via Agent-Based Simulation

We use agent-based simulation in a coordination game to analyse the possibility of market power abuse in a competitive electricity market. The context of this was a real application to the England and Wales electricity market as part of a Competition Commission Inquiry into whether two particular generators could profitably influence wholesale prices. The research contributions of this paper are both in the areas of market power and market design policy issues for electricity markets, and in the methodological use of large industry-wide evolutionary simulation models.

[1]  D. Bunn,et al.  Divestiture of Generation Assets in the Electricity Pool of England and Wales: A Computational Approach to Analyzing Market Power , 2001 .

[2]  M. Rothkopf.  Daily Repetition: A Neglected Factor in the Analysis of Electricity Auctions , 1999 .

[3]  Nick Feltovich,et al.  Reinforcement-based vs. Belief-based Learning Models in Experimental Asymmetric-information Games , 2000 .

[4]  Benjamin F. Hobbs,et al.  Network Models of Spatial Oligopoly with an Application to Deregulation of Electricity Generation , 1986, Oper. Res..

[5]  Robert Forsythe,et al.  Selection Criteria in Coordination Games: Some Experimental Results , 1987 .

[6]  Edward J. Anderson,et al.  Using Supply Functions for Offering Generation into an Electricity Market , 2002, Oper. Res..

[7]  Derek W. Bunn,et al.  Model-Based Comparisons of Pool and Bilateral Markets for Electricity , 2000 .

[8]  Timothy N. Cason,et al.  PRICE FORMATION IN SINGLE CALL MARKETS , 1997 .

[9]  David M. Kreps,et al.  Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes , 1983 .

[10]  Frank A. Wolak,et al.  Collusive Pricing with Capacity Constraints in the Presence of Demand Uncertainty , 1992 .

[11]  Andrew W. Moore,et al.  Reinforcement Learning: A Survey , 1996, J. Artif. Intell. Res..

[12]  S. Borenstein,et al.  An Empirical Analysis of the Potential for Market Power in California&Apos;S Electricity Industry , 1998 .

[13]  A. Roth,et al.  Learning in Extensive-Form Games: Experimental Data and Simple Dynamic Models in the Intermediate Term* , 1995 .

[14]  E. Rowland.  Theory of Games and Economic Behavior , 1946, Nature.

[15]  Derek Bunn,et al.  Energy Markets Group A Model-Based Comparison of Pool and Bilateral Market Mechanisms for Electricity Trading , 1999 .

[16]  Al Sweetser,et al.  Measuring a dominant firm's market power in a restructured electricity market, a case study of Colorado , 1999 .

[17]  P. Klemperer,et al.  Supply Function Equilibria in Oligopoly under Uncertainty , 1989 .

[18]  Alzira Salama,et al.  Privatization and culture change: British Nuclear Fuels case study , 1997 .

[19]  Farshid Vahid,et al.  Predicting How People Play Games: A Simple Dynamic Model of Choice , 2001, Games Econ. Behav..

[20]  James Bushnell,et al.  Market Power in Electricity Markets: Beyond Concentration Measures , 1999 .

[21]  J. Huyck,et al.  Tacit Coordination Games, Strategic Uncertainty, and Coordination Failure , 1990 .

[22]  Richard S. Sutton,et al.  Reinforcement Learning: An Introduction , 1998, IEEE Trans. Neural Networks.

[23]  Blaise Allaz,et al.  Cournot Competition, Forward Markets and Efficiency , 1993 .

[24]  Derek W. Bunn,et al.  Agent-based simulation-an application to the new electricity trading arrangements of England and Wales , 2001, IEEE Trans. Evol. Comput..

[25]  N. M. Fehr,et al.  SPOT MARKET COMPETITION IN THE UK ELECTRICITY INDUSTRY , 1993 .

[26]  Yves Smeers,et al.  Spatial Oligopolistic Electricity Models with Cournot Generators and Regulated Transmission Prices , 1999, Oper. Res..

[27]  Edward J. Anderson,et al.  Optimal Offer Construction in Electricity Markets , 2002, Math. Oper. Res..

[28]  Leigh Tesfatsion,et al.  Market power and efficiency in a computational electricity market with discriminatory double-auction pricing , 2001, IEEE Trans. Evol. Comput..

[29]  R. Green,et al.  Competition in the British Electricity Spot Market , 1992, Journal of Political Economy.