The role of a market maker in networked cournot competition

Subhonmesh Bose; Desmond W.H. Cai; Steven Low; Adam Wierman

doi:10.1109/CDC.2014.7040088

The role of a market maker in networked cournot competition

Subhonmesh Bose, Desmond W.H. Cai, Steven Low, Adam Wierman

Research output: Contribution to journal › Conference article › peer-review

Abstract

We study the role of a market maker (or market operator) in a transmission constrained electricity market. We model the market as a one-shot networked Cournot competition where generators supply quantity bids and load serving entities provide downward sloping inverse demand functions. This mimics the operation of a spot market in a deregulated market structure. In this paper, we focus on possible mechanisms employed by the market maker to balance demand and supply. In particular, we consider three candidate objective functions that the market maker optimizes - social welfare, residual social welfare, and consumer surplus. We characterize the existence of Generalized Nash Equilibrium (GNE) in this setting and demonstrate that market outcomes at equilibrium can be very different under the candidate objective functions.

Original language	English (US)
Article number	7040088
Pages (from-to)	4479-4484
Number of pages	6
Journal	Proceedings of the IEEE Conference on Decision and Control
Volume	2015-February
Issue number	February
DOIs	https://doi.org/10.1109/CDC.2014.7040088
State	Published - 2014
Externally published	Yes
Event	2014 53rd IEEE Annual Conference on Decision and Control, CDC 2014 - Los Angeles, United States Duration: Dec 15 2014 → Dec 17 2014

ASJC Scopus subject areas

Control and Systems Engineering
Modeling and Simulation
Control and Optimization

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title = "The role of a market maker in networked cournot competition",

abstract = "We study the role of a market maker (or market operator) in a transmission constrained electricity market. We model the market as a one-shot networked Cournot competition where generators supply quantity bids and load serving entities provide downward sloping inverse demand functions. This mimics the operation of a spot market in a deregulated market structure. In this paper, we focus on possible mechanisms employed by the market maker to balance demand and supply. In particular, we consider three candidate objective functions that the market maker optimizes - social welfare, residual social welfare, and consumer surplus. We characterize the existence of Generalized Nash Equilibrium (GNE) in this setting and demonstrate that market outcomes at equilibrium can be very different under the candidate objective functions.",

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AU - Cai, Desmond W.H.

AU - Low, Steven

AU - Wierman, Adam

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N2 - We study the role of a market maker (or market operator) in a transmission constrained electricity market. We model the market as a one-shot networked Cournot competition where generators supply quantity bids and load serving entities provide downward sloping inverse demand functions. This mimics the operation of a spot market in a deregulated market structure. In this paper, we focus on possible mechanisms employed by the market maker to balance demand and supply. In particular, we consider three candidate objective functions that the market maker optimizes - social welfare, residual social welfare, and consumer surplus. We characterize the existence of Generalized Nash Equilibrium (GNE) in this setting and demonstrate that market outcomes at equilibrium can be very different under the candidate objective functions.

AB - We study the role of a market maker (or market operator) in a transmission constrained electricity market. We model the market as a one-shot networked Cournot competition where generators supply quantity bids and load serving entities provide downward sloping inverse demand functions. This mimics the operation of a spot market in a deregulated market structure. In this paper, we focus on possible mechanisms employed by the market maker to balance demand and supply. In particular, we consider three candidate objective functions that the market maker optimizes - social welfare, residual social welfare, and consumer surplus. We characterize the existence of Generalized Nash Equilibrium (GNE) in this setting and demonstrate that market outcomes at equilibrium can be very different under the candidate objective functions.

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The role of a market maker in networked cournot competition

Abstract

ASJC Scopus subject areas

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