| We consider the problem of formulating an optimal offer curve (supply function) for an electric power generator with market power, in the presence of a stochastic model for competitors' behaviour, demand, and transmission network effects. We suggest a practical method, based on dynamic programming, for solving the resulting stochastic optimization problem. This method could potentially execute much more quickly than previous approaches based on mixed-integer programming. We present numerical results, both for a toy (three-node) model, and a larger model representing the New Zealand electricity market. |
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