Analysing market power in the restructured electricity market using game theory

This paper focuses on the investigation of market power behaviour of market participants in the deregulated electricity market. The physical exercise of market power of a firm includes withholding part of its output and raising the price above its marginal cost for a certain period of time. In the simulations, different competition styles are considered. The results show that the price will increase dramatically when market participants behave strategically. Participants obtain significant profits through their strategic gaming behaviours. Market price, generators' generation and profit have been compared. We suggest that the game theoretical approach could help us to predict the strategic behaviour of the market participants, so that we can prevent or reduce the effect of market power in the market