Oligopolistic Competition in Power Networks: A Conjectured Supply Function Approach

• Published in: IEEE power engineering review Vol. 22; no. 5; p. 68
• Main Authors: Day, C. J., Hobbs, B. F., Pang, J. S.
• Format: Journal Article
• Language: English
• Published: New York IEEE 01-05-2002; The Institute of Electrical and Electronics Engineers, Inc. (IEEE)
• Subjects: Competition; complementarity; DC generators; Direct current; Divestment; Economic models; Economic theory; Electricity competition; electricity generation; England; market models; Marketing; Markets; Mathematical models; Monitoring; Networks; Performance analysis; Power generation; Power system analysis computing; Power system modeling; Power system simulation; Power system stability; Protocols; SCADA systems; strategic pricing; Studies; supply function models; Uniqueness; United Kingdom
• ISSN: 0272-1724; 1558-1705
• DOI: 10.1109/MPER.2002.4312211

Conjectured supply function (CSF) models of competition among power generators on a linearized DC network are presented. As a detailed survey of the power market modeling literature shows, CSF models differ from previous approaches in that they represent each generation company's (GenCo) conjectures regarding how rival firms will adjust sales in response to price changes. The CSF approach is a more realistic and flexible framework for modeling imperfect competition than other models for three reasons. First, the models include as a special case the Cournot conjecture that rivals will not change production if prices change; thus, the CSF framework is more general. Second, Cournot models cannot be used when price elasticity of demand is zero, but the proposed models can. Third, unlike supply function equilibrium models, CSF equilibria can be calculated for large transmission networks. Existence and uniqueness properties for prices and profits are reported. An application shows how transmission limits and strategic interactions affect equilibrium prices under forced divestment of generation.