Optimizing Prosumer Policies in Periodic Double Auctions Inspired by Equilibrium Analysis (Extended Version)

TL;DR

This paper develops equilibrium-based strategies for prosumers in periodic double auctions, enabling them to optimize multi-round bidding by reconstructing supply curves, with demonstrated effectiveness in a simulated wholesale market environment.

Contribution

It introduces Markov perfect Nash equilibrium policies for prosumers and an algorithm to reconstruct supply curves from past data, advancing strategic bidding in PDAs.

Findings

MPNE policies effectively optimize prosumer bidding strategies.

The MPNE-BBS algorithm accurately reconstructs supply curves from historical auction data.

Proposed methods outperform baseline strategies in simulated market tests.

Abstract

We consider a periodic double auction (PDA) wherein the main participants are wholesale suppliers and brokers representing retailers. The suppliers are represented by a composite supply curve and the brokers are represented by individual bids. Additionally, the brokers can participate in small-scale selling by placing individual asks; hence, they act as prosumers. Specifically, in a PDA, the prosumers who are net buyers have multiple opportunities to buy or sell multiple units of a commodity with the aim of minimizing the cost of buying across multiple rounds of the PDA. Formulating optimal bidding strategies for such a PDA setting involves planning across current and future rounds while considering the bidding strategies of other agents. In this work, we propose Markov perfect Nash equilibrium (MPNE) policies for a setup where multiple prosumers with knowledge of the composite supply curve compete to procure commodities. Thereafter, the MPNE policies are used to develop an algorithm called MPNE-BBS for the case wherein the prosumers need to re-construct an approximate composite supply curve using past auction information. The efficacy of the proposed algorithm is demonstrated on the PowerTAC wholesale market simulator against several baselines and state-of-the-art bidding policies.