Assessing impact of subjective demand beliefs on a dynamic duopoly electricity market game

• We consider the impact of the subjective demand functions on a dynamic electricity market game.
• The game scenarios in this paper are “playing is believing”.
• The results show that Gencos’ knowledge error would influence system equilibriums.
• The economic value of demand information is assessed regarding the system performances.

In the context of liberalized markets, market outcomes generally result from the strategic interactions of all market players. Generation company (Genco), as the distributed players, build their subjective demand evaluations (SDFs) about market for optimal bidding purpose. Due to the differences in terms of data availability and modeling techniques, subjective demand models held by various Gencos are heterogeneous and normally deviate from the real market model as well. The picture of a real electricity market game in Genco’s eye is ‘playing is believing’. Therefore, a question naturally comes to the table: how those SDFs with the heterogeneous manner impact individual player’s decision and game results. To answer this question, this paper relaxes a conventional assumption, commonly used in the classical oligopolistic equilibrium model, that one correct and uniform demand knowledge is shared by all Gencos. The results suggest that the system equilibriums would be influenced by the Gencos’ knowledge about market demand. The economic value of demand information is assessed regarding the system performances.