A Game-Theoretic Model for Retail Electricity Market Using Adaptive Expectations Learning

Abstract

Establishing a retail market and formulating customers' choices improves market competitiveness in a restructured system. Competition among retailers increases the choices and enhances the economic interest of the consumers. This paper presents a competition model in the retail market based on the Bertrand game. Unlike most of the recent studies, in this paper, the effect of distribution line constraints is considered on competitive prices. Moreover, a learning-based method called adaptive expectations is presented for the retailers with lower market potential, to improve their performance in an oligopolistic market. The results show that the capacity of distribution network lines directly affects the level of competition among retailers. The line constraints may change the situation to the advantage of or at the disadvantage of one or more retailers in the market. The learning method used in the paper has expressed itself as improving the retailers' profit with a smaller market potential of up to 20%, while other retailers experience declining profits.