Analyzing the investment impact of strategic players with market power

By comparing the results of the action of price-taking, price-making and strategic players with market power, this study will generate results for different scenarios of investment costs and transmission capacity constraints. The problems are formulated as either a strategic Mixed Complementarity Problem (MCP) or strategic Mathematical Program with Equilibrium Constraints (MPEC). The formulation of the model permits the modeling of the strategic behavior of the market participants through a game theoretical approach. The investment impact of strategic player with market power will thereby be discussed in detail. Through a game theoretical approach, a detailed comparative study is carried out in order to study the power market. By comparing the wide range of market designs, the direction of distinctive market model has been studied in terms of generation capacity expansion and market equilibriums. The proposed study has led to the conclusion that increasing market power leads to decreasing willingness to invest in production capacity. The case study shows large deviations in investments due to market design. This means that larger investment models that assume perfect competition will most likely to over-invest, compared to actual investment levels in the future. The allocation of the investments is also affected by the market design. It is reasonable to assume that the same trends and indications can be found in larger marketand investments models such as EFIs Muliti-Area Power-Market Simulator (EMPS), Power System Simulation Tool (PSST) and Net-Op.