PAB And MCP Market Equilibrium Analysis Of Electricity Pricing Mechanism

As electricity markets are rapidly emerging around the world, a timely topic arises, that is, how to predict or analyze the performance of a given market design. The answer of the question can significantly influence policy-making. The mainstream approach is that of game theory. The idea of this approach is to predict market performance assuming that market players will take Nash equilibrium strategies.In this paper, we formulate a bilevel programming price competition game for modeling oligopolistic competition in a single-period electricity market auction, with the assumption that generator marginal costs are identical. We also characterize Nash Equilibrium under tight and weak capacity constraints both in MCP (Market Clearing Price) and PAB (Pay as Bid) pricing. In theory, we deduce that PAB pricing reduces price volatility under tight capacity constraints with cost of the higher average market price.And an auction experiment is designed and conducted to test a game-theoretic result introduced by the authors. The results show that the presented experiment is reasonable and effective.