Price dynamics and market power in an agent-based power exchange

Silvano Cincotti; Eric Guerci; Marco Raberto

doi:10.1117/12.609439

23 May 2005 Price dynamics and market power in an agent-based power exchange

Silvano Cincotti, Eric Guerci, Marco Raberto

Proceedings Volume 5848, Noise and Fluctuations in Econophysics and Finance; (2005) https://doi.org/10.1117/12.609439
Event: SPIE Third International Symposium on Fluctuations and Noise, 2005, Austin, Texas, United States

Abstract

This paper presents an agent-based model of a power exchange. Supply of electric power is provided by competing generating companies, whereas demand is assumed to be inelastic with respect to price and is constant over time. The transmission network topology is assumed to be a fully connected graph and no transmission constraints are taken into account. The price formation process follows a common scheme for real power exchanges: a clearing house mechanism with uniform price, i.e., with price set equal across all matched buyer-seller pairs. A single class of generating companies is considered, characterized by linear cost function for each technology. Generating companies compete for the sale of electricity through repeated rounds of the uniform auction and determine their supply functions according to production costs. However, an individual reinforcement learning algorithm characterizes generating companies behaviors in order to attain the expected maximum possible profit in each auction round. The paper investigates how the market competitive equilibrium is affected by market microstructure and production costs.

Citation Download Citation

Silvano Cincotti, Eric Guerci, and Marco Raberto "Price dynamics and market power in an agent-based power exchange", Proc. SPIE 5848, Noise and Fluctuations in Econophysics and Finance, (23 May 2005); https://doi.org/10.1117/12.609439

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