Game Theory and its Impact on Economic Profit in the Electric Power Market

Due to the creation of electricity markets, which are characterized by the competitiveness among participants, particularly in the generation of electric energy, this led to a considerable increase in the number of energy producers. However, in order to maximize their profit, some of them submit their bids beyond competitive prices, incurring in some irregularities in the market. Therefore, this paper analyzes the participants strategy using game theory, because the electricity market is a conflict scenario, in which participants interests are at play. For this purpose, a bilevel optimization model was employed, incorporating a cooperative game theory methodology known as incomplete information gaming, which maximizes the profit of the producers through an optimal strategy and minimizes the systems operating costs. The results obtained in this paper show that, using the game methodology, it is possible to achieve a positive impact on participants profit. However, it is necessary for the participants to be rational and logical when they make their bids. Moreover, the results indicate that this methodology can be used to identify irregularities in the market, such as market manipulation and market power indicators in the participants.