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arXiv · 1807.07088

A mean-field game approach to price formation in electricity markets

Diogo Gomes·João Saúde
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Abstract

Here, we introduce a price-formation model where a large number of small players can store and trade electricity. Our model is a constrained mean-field game (MFG) where the price is a Lagrange multiplier for the supply vs. demand balance condition. We establish the existence of a unique solution using a fixed-point argument. In particular, we show that the price is well-defined and it is a Lipschitz function of time. Then, we study linear-quadratic models that can be solved explicitly and compare our model with real data.

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Diogo Gomes, João Saúde. 2018-07-18. A mean-field game approach to price formation in electricity markets. https://arxiv.org/abs/1807.07088

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