Nash equilibrium in a pay-as-bid electricity market: Part 1 – existence and characterization

Abstract

We consider a model of a pay-as-bid electricity market based on a multi-leader-common-follower approach where the producers as leaders are at the upper level and the regulator as a common follower is at the lower level. We fully characterize Nash equilibria for this model by describing necessary and sufficient conditions for their existence as well as providing explicit formulas of such equilibria in the market.

Keywords:

• Electricity market
• multi-leader-follower game
• Nash equilibrium
• best response

Notes

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of the EDF group. Assumptions made within the analysis of this article are not reflective of the position of the EDF group .

Dedicated to Professor Franco Giannessi on the occasion of his 80th birthday and to Professor Diethard Pallaschke on the occasion of his 75th birthday.

Additional information

Funding

This research benefited from the support of the ‘FMJH Program Gaspard Monge in optimization and operation research’, and from the support to this program from EDF. This research has been also supported by the Grant Agency of the Czech Republic [grant number GA15-00735S].