Modeling Non-cooperative Game of GENCOs' Participation in Electricity Markets with Prospect Theory

Optimal generation companies' participation in different electricity markets can be modeled as a competitive game. Each company tries to behave optimally considering other players' actions, in the game. Generally, the player's profit is formulated based on expected utility method with objective behavior completely. However, the subjectivity of players causes the differences between expected and real actions. This paper proposes a game of generation companies' participation in adjusting the optimal bidding strategies for the day ahead energy market. Moreover, the subjectivity of players and how it affects their strategy determination have been modeled by applying the prospect theory on the game. In addition, this paper presents the full formulation of mixed strategy noncooperative game of GENCOs in both conditions of objective and subjective behavior of players. Finally, simulation results have been provided to show how subjectivity causes players' avoidance from the strategies expected to have higher losses than others.