Raiffa-Kalai-Smorodinsky Bargaining Solution for Bilateral Contracts in Electricity Markets

In electricity markets, bilateral contracts (BC) are used to hedge against price volatility in the spot market. Pricing these contracts requires scheduling from either the buyer or the seller aiming to achieve the highest profit possible. Since this problem includes different players, a Generation C...

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Bibliographic Details
Published inEnergies (Basel) Vol. 13; no. 9; p. 2397
Main Authors Garcia, Reinaldo Crispiniano, Contreras, Javier, Barbosa, Matheus de Lima, Toledo, Felipe Silva, da Cunha, Paulo Vinicius Aires
Format Journal Article
LanguageEnglish
Published Basel MDPI AG 01.05.2020
Subjects
Bargaining
bilateral contracts
Competition
Contracts
Corporate profits
Electricity
Electricity distribution
electricity market
Equilibrium
Game theory
Prices
Raiffa–Kalai–Smorodinsky bargaining solution
Random variables
Scheduling
Volatility
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Summary:In electricity markets, bilateral contracts (BC) are used to hedge against price volatility in the spot market. Pricing these contracts requires scheduling from either the buyer or the seller aiming to achieve the highest profit possible. Since this problem includes different players, a Generation Company (GC) and an Electricity Supplier Company (ESC) are considered. The approaches to solve this problem include the Nash Bargaining Solution (NBS) equilibrium and the Raiffa–Kalai–Smorodinsky (RKS) bargaining solution. The innovation of this work is the implementation of an algorithm based on the RKS equilibrium to find a compromise strategy when determining the concessions to be made by the parties. The results are promising and show that the RKS approach can obtain better results compared to the Nash equilibrium method applied to a case study.
ISSN:1996-1073
1996-1073
DOI:10.3390/en13092397