Prosumer Behavior: Decision Making with Bounded Horizon
Mohsen Rajabpour, Arnold Glass, Robert Mulligan, and Narayan B., Mandayam

TL;DR
This paper introduces a behavioral model for prosumer energy decision-making that incorporates a bounded time horizon, better fitting real-world data than traditional expected utility theory.
Contribution
It proposes a new bounded horizon model for prosumer decisions, extending expected utility theory to better reflect human decision-making in energy markets.
Findings
Bounded horizon of 4-5 days fits data better than unbounded models.
The new model captures prosumer behavior more accurately.
Traditional EUT is less effective in ongoing energy decision contexts.
Abstract
Most studies of prosumer decision making in the smart grid have focused on single, temporally discrete decisions within the framework of expected utility theory (EUT) and behavioral theories such as prospect theory. In this work, we study prosumer decision making in a more natural, ongoing market situation in which a prosumer has to decide every day whether to sell any surplus energy units generated by the solar panels on her roof or hold (store) the energy units in anticipation of a future sale at a better price. Within this context, we propose a new behavioral model that extends EUT to take into account the notion of a bounded temporal horizon over which various decision parameters are considered. Specifically, we introduce the notion of a bounded time window (the number of upcoming days over which a prosumer evaluates the probability that each possible price will be the highest) that…
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