Duopoly Electricity Markets with Accurate and Inaccurate Market Goals

Electricity markets are complex systems due to their deregulation and restructuring. We develop an agent-based simulation model for a stylized electricity pool market and simulate the market as a repeated game. An online hill climbing with adjustment algorithm is applied to generator agents to guide them to bid strategically to reach their expected market share. It is observed that accurate (or genial) expected market goals lead to collusive behavior of generator agents with an equilibrium where their total profit is maximized. On the other hand, it is also found that inaccurate (or malicious) market goals could result in price war with an equilibrium where their profits are minimized.