Oligopoly models for market price of electricity under demand uncertainty and unit reliability

Several oligopoly models have been proposed for representing strategic behavior in electricity markets, which include Bertrand, Cournot, and Supply Function Equilibrium (SFE). For the most part, these models are deterministic, with the exception of the SFE originally developed by Klemperer and Meyer. However, their model does not include supply side uncertainties. In this paper, we consider both load and supply side uncertainties (resulting from generator availabilities). We obtain Nash equilibrium solutions for Cournot and SFE models, in which asymmetric firms (whose generating units have different costs and capacities) submit their bids so that each firm's expected profit is maximized. (C) 2006 Elsevier B.V. All rights reserved.