Strategic Pricing when Electricity is Storable
نویسندگان
چکیده
In this paper, we develop a dynamic Bertrand model of competition among hydroelectric (hydro) generators. Unlike other competitors in electricity generation markets, hydro generators’ current pricing decisions affect their future productive capacity through their impact on available water reserves. Our model assumes that each player uses a Markov strategy based on the current state of water reserves, and water replenishment is governed by a stochastic process. Our analysis develops useful insights for regulatory policy in predominantly hydro-based electricity markets, including the effect of strategic behavior on system reliability and dispatch efficiency, the impact of price caps, and the likelihood of collusion.
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