Game theory applications to electricity supply industry, Part 1: Theory

With the increasing international trend towards the liberalisation of the electricity supply industry, the main issues facing the utilities in the future are competitiveness of generation, commercial strategy for customers and cost reductions. In any competitive market, decision makers need some hell, during negotiations involving other parties. Game Theory, has been defined by W. F. Lucas as "a collection of mathematical models formulated to study decision-making situations involving conflict and cooperation", hence the aim of the work. This paper is in two parts: Part 1 will present a critical appraisal of the theoretic developments of the subject of Game Theory as described in the literature. This will ensure the communication of potential practical applications of the existing theory, expressed in simpler terms , to a wider electrical power engineering audience. Part 2, will expose the current international applications of Game Theory; their possible benefits and relevance of applying the theory to the theory to the electricity supply industry.