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Faculty of Economics

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Newbery, D. M.

The roubstness of agent-based models of electricity wholesale markets

CWPE1228

Abstract: Agent-based modelling is an attractive way of finding equilibria in complex problems involving strategic behaviour, particularly in electricity markets with transmission constraints. However, while it may be possible to demonstrate convergence of learning behaviour to a Nash equilibrium, that is not sufficient to establish that the equilibrium is robust against more sophisticated strategy choices. This note examines two particular forms of agent-based modelling used in electricity market models, both variants of mark-up pricing, and demonstrates that they are robust against other strategies.Electric utilities, industrial policy, political economy

Keywords: agent-based modelling, electricity markets, mark-up equilibria, stability, oligopoly, learning

JEL Codes: C63 C73 D43 L10 L13 L94

Author links: David Newbery  

PDF: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe1228.pdf

EPRG Paper Link: 1213

Open Access Link: https://doi.org/10.17863/CAM.1037