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Proceedings Paper

Price dynamics and market power in an agent-based power exchange
Author(s): Silvano Cincotti; Eric Guerci; Marco Raberto
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Paper 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.

Paper Details

Date Published: 23 May 2005
PDF: 8 pages
Proc. SPIE 5848, Noise and Fluctuations in Econophysics and Finance, (23 May 2005); doi: 10.1117/12.609439
Show Author Affiliations
Silvano Cincotti, Univ. of Genova (Italy)
Eric Guerci, Univ. of Genova (Italy)
Marco Raberto, Univ. of Genova (Italy)


Published in SPIE Proceedings Vol. 5848:
Noise and Fluctuations in Econophysics and Finance
Derek Abbott; Jean-Philippe Bouchaud; Xavier Gabaix; Joseph L. McCauley, Editor(s)

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