Analysis of a duopoly supply chain and its application in electricity spot markets

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

11 Scopus Citations
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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)239-259
Journal / PublicationAnnals of Operations Research
Volume135
Issue number1
Publication statusPublished - Jan 2005
Externally publishedYes

Abstract

This paper studies a supply chain consisting of two suppliers and one retailer in a spot market, where the retailer uses the newsvendor solution as its purchase policy, and suppliers compete for the retailer's purchase. Since each supplier's bidding strategy affects the other's profit, a game theory approach is used to identify optimal bidding strategies. We prove the existence and uniqueness of a Nash solution. It is also shown that the competition between the supplier leads to a lower market clearing price, and as a result, the retailer benefits from it. Finally, we demonstrate the applicability of the obtained results by deriving optimal bidding strategies for power generator plants in the deregulated California energy market. © 2005 Springer Science + Business Media, Inc.

Research Area(s)

  • Demand allocation, Deregulated energy market, Dynamic programming, Game theory, Information updates