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Viewing the deregulated electricity market as a bilevel programming problem

Bjørndal, Mette; Jörnsten, Kurt
Working paper
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URI
http://hdl.handle.net/11250/163789
Date
2000
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  • Discussion papers (FOR) [509]
Abstract
In this paper we present a bilevel programming formulation of a deregulated electricity market. By looking at a deregulated electricity market in this format we achieve two things,

the relation between a deregulated electricity market and other economic models that can be formulated as bilevel programming problems becomes clear, (i.e. Stackelberg leader-follower games and principal-agency models)

an explanation of the reason why the so called "folk theorems" in electricity networks can be proven to be false

The interpretation of a deregulated electricity market as a bilevel program also indicates the magnitude of the error that can be made if the electricity market model studied does not take the physical constraints into account or oversimplifies the electricity network to a radial network.
Publisher
Norwegian School of Economics and Business Administration. Department of Finance and Management Science
Series
Discussion paper
2000:9

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