Improving the game theoretic analysis of electricity auctions applied in medium markets

Abstract Payment cost minimization (PCM) is an appropriate method for bid selection. Solving auctions by PCM is complex and time consuming, particularly under game theoretic analysis of electricity auctions, because it requires many computational iterations. The present study proposes a new algorithm to solve electricity auctions in a game theoretic analysis framework with a multi-player matrix game. The proposed algorithm provides two innovations for solving the auction and finding the Nash equilibria in a fast and accurate manner. This method facilitates analysis of the market behavior for changes in strategy by suppliers. Numerical studies demonstrate the effectiveness of the proposed algorithm.