EPECs as models for electricity markets

We discuss two topics. The first is pragmatic; it concerns modeling and solving bilevel games in the form of equilibrium problems with equilibrium constraints, EPECS. Several applications come from modeling the behavior of generators and retail consumers in electricity markets. We explain how EPECs can be considered as complementarity problems - which are more familiar as stationary conditions in constrained nonlinear optimization - and hence software for solving complementarity problems can be applied. The second topic is more fundamental and raises perhaps more questions than it answers: Can we describe the meaning or value of models, e.g., EPECs, in economics when there is no obvious candidate for the "canonical" or "natural" model? This arises because while there are canonical models for the case of perfect competition, there seem to be a plethora of different approaches when players act strategically.