Equilibrium solution for periodic double auctions to generate optimal bidding strategies for energy market

Abstract

Periodic double auction (PDA) setting is where buyers of the auction have multiple (but finite) opportunities to procure multiple but fixed units of commodity. The goal of each buyer participating in such auctions is to reduce their cost of procurement by planning purchase across multiple rounds of the PDA. Formulating such optimal bidding strategies in multi-agent periodic double auction setting is a challenging problem as such strategies involve planning across current and future auctions. The method and system disclosed herein addresses such setup wherein the composite supply curve is known to all buyers. Specifically, for the complete information setting, the method models the PDA as Markov game and derives Markov perfect Nash equilibrium (MPNE) solution to devise an optimal bidding strategy for the case when each buyer is allowed to make one bid per round of the PDA. The efficacy of the Nash policies obtained is demonstrated with numerical experiments.