Robust trading in spot and forward oligopolistic markets

In this article we consider the interaction between forward and spot prices and analyze trading in oligopolistic markets under uncertainty. We extend the two-stage risk-neutral stochastic model to worst-case analysis with rival demand scenarios. At the methodological level we develop a robust analysis in oligopolies and derive analytical results on the impact of demand uncertainty on the oligopolies' behavior when using robust optimal strategies. We compare the performance of robust optimization with the cases of no uncertainty and risk-neutral uncertainty. We show that under robust oligopolies the firms tend to produce more and to trade more in the forward markets, moreover, under robust optimization market prices are lower.