Prosumers Participation in Markets: A Scalar-Parameterized Function Bidding Approach

TL;DR

This paper introduces a scalar-parameterized function bidding approach for prosumers in uniform-price markets, establishing Nash equilibrium existence and providing a method for efficient computation, with case studies on welfare impacts.

Contribution

It proposes a novel scalar-parameterized bidding mechanism for prosumers, proving equilibrium properties and offering computational methods for market analysis.

Findings

Existence and uniqueness of Nash equilibrium established.

Efficient computation method for market equilibrium provided.

Case study illustrates welfare loss variations under market parameter changes.

Abstract

In uniform-price markets, suppliers compete to supply a resource to consumers, resulting in a single market price determined by their competition. For sufficient flexibility, producers and consumers prefer to commit to a function as their strategies, indicating their preferred quantity at any given market price. Producers and consumers may wish to act as both, i.e., prosumers. In this paper, we examine the behavior of profit-maximizing prosumers in a uniform-price market for resource allocation with the objective of maximizing the social welfare. We propose a scalar-parameterized function bidding mechanism for the prosumers, in which we establish the existence and uniqueness of Nash equilibrium. Furthermore, we provide an efficient way to compute the Nash equilibrium through the computation of the market allocation at the Nash equilibrium. Finally, we present a case study to illustrate the welfare loss under different variations of market parameters, such as the market's supply capacity and inelastic demand.