Application Of Bidding Strategies Based On Game Theory For Generation Companies

Power industry is the basic utility of the national economy. Electricity market reform is a common trend in the world, and will also be the inevitable reform choice of China. Each generation company gains market share through bidding actions in the power market. To provide theoretical and decision support for generation companies, the paper focused on bidding strategies for those company who has market power and help develop a competitive trading regulation and specific program in supply side. Therefore, the study has important theoretical and practical significance.Due to the nature characteristic of the power industry, the actual market is often closer to the oligopoly power market. Therefore, the generation companies need to consider not only the costs of themselves but also the costs of opponents when making decision to form bidding strategies. Decision-making is a typical game process. Based on the original idea of game theory and the integrity of their costs, this paper researched on the bidding problem of multi-generation companies in non-cooperative static game under the condition of complete and incomplete information. Firstly, in complete information market, the cost function of each generation company is varying. Then multi-generation non-cooperative complete information game Cournot model was established, the Nash equilibriums were solved by mathematical induction and analytical method. Equilibriums provide theoretical support for power market generation side bidding behaviors of multiple generations. The case study describes bidding of hydropower and fire generation companies and compares difference between each company’s bidding strategies. Some useful and practical conclusions were concluded. Secondly, in incomplete information market, for cost information asymmetry, assuming that two generations’ variable costs are high, low two types and the probability of occurrence of each type are equal. Then establish extended form of Cournot model and obtain Bayesian equilibrium, finally extend to three players. Summarizing the model changing trend and solve the difficulty when increasing the number of players. Multi- generation’s model was established at last. Consequently, the equilibriums were compared and analyzed. Finally, a case was studied to obtain the equilibriums including the outputs and prices, and bidding behaviors of the generation companies were analyzed and some effective and practical conclusions were concluded.Electricity market reform is a system project, involving multiple interests. There are both opportunities and challenges among the reform. In the end, the paper discussed possible problems and directions of generation side bidding for further research.