Software Agents for Market Design and Analysis

The idea that large-scale generating units will operate at marginal cost when given the ability to offer their power for sale in a uniform price auction is at best wishful thinking. In fact, both real and experimental data show that the more uncertainty a supplier faces (e.g., load uncertainty, uncertainty of other suppliers, etc.) the more they will try to increase their profits by submitting offers to sell higher than marginal cost and by withholding units if permitted. This makes predicting unit commitment and dispatch ahead of time difficult. In this Chapter we explore characteristics of software agents that were designed based on the outcome of tests with human subjects using a uniform price auction with stochastic load. The agent behavior is compared to the behavior of the subjects. Both subject and agent behavior are classified based on the data. Differences and similarities are noted and explained.