ABSTRACT Thermal generators’ emissions constitute an externality on which a regulator might wish ... more ABSTRACT Thermal generators’ emissions constitute an externality on which a regulator might wish to impose constraints. In addition, transmission capacity for sending energy may be naturally restricted by the grid facilities. Both pollution standards and transmission capacity impose constraints, coupling the strategies of the agents in their joint strategy space. To force competitive electricity generators to respect those constraints when individual monitoring is unavailable we envisage the regulator solving a generalised Nash equilibrium problem to establish an equilibrium in which the joint constraints are satisfied. If the regulator appropriately modifies the generators’ payoffs then they will play a decoupled game in which they can ignore the information on the joint constraints. For the payoff modification to induce the required behaviour a coupled constraints equilibrium needs to exist and be unique. We borrow from the Electrical Engineering (EE) literature a three-node network model that has these properties and use it in this paper to discuss and explain the behaviour of the agents subjected to the coupled constraints. We find that the imposition of transmission and environmental restrictions may increase the output share of an “inefficient” generator and decrease consumer surplus.
For pension-savers, a low payoff is a financial disaster. Such investors will most likely prefer ... more For pension-savers, a low payoff is a financial disaster. Such investors will most likely prefer left-skewed payoff distributions over right-skewed payoff distributions. We explore how such distributions can be delivered. Cautious-relaxed utility measures are cautious in ensuring that payoffs don’t fall much below a reference value, but relaxed about exceeding it. We find that the payoff distribution delivered by a cautious-relaxed utility measure has appealing features which payoff distributions delivered by traditional utility functions don’t. In particular, cautious-relaxed distributions can have the mass concentrated on the left, hence be left-skewed. However, cautious-relaxed strategies prescribe frequent portfolio adjustments which may be expensive if transaction costs are charged. In contrast, more traditional strategies can be time-invariant. Thus we investigate the impact of transaction costs on the appeal of cautious-relaxed strategies. We find that relatively high transaction fees are required for the cautious-relaxed strategy to lose its appeal. This paper contributes to the literature which compares utility measures by the payoff distributions they produce and finds that a cautious-relaxed utility measure will deliver payoffs that many investors will prefer.
Purpose The aim of this paper is to propose and analyse policies capable of generating left-ske... more Purpose The aim of this paper is to propose and analyse policies capable of generating left-skewed pension distributions. Such policies can deliver large pension values with high probability and hence are of interest to practical fund managers. Design/methodology/approach ...
This paper is about games where the agents face constraints in the combined strategy space (unlik... more This paper is about games where the agents face constraints in the combined strategy space (unlike in standard games where the action sets are defined separately for each player) and about computational methods for solutions to such games. The motivation examples for such games include electricity generation problems with transmission capacity constraints, environmental management to control pollution and internet switching to comply to buffers of bounded capacity. In each such problem a regulator may aim at compliance to standards or quotas through taxes or charges. The relevant solution concept for these games has been known under several names like generalised Nash equilibrium, coupled constraint equilibrium and more. Existing numerical methods converging to such an equilibrium will be explained. Application examples of use of NIRA, which is a suite of Matlab routines that implement one of the methods, will be provided.
Page 1. Electricity Market Games with Constraints on Transmission Capacity and Emissions Javier C... more Page 1. Electricity Market Games with Constraints on Transmission Capacity and Emissions Javier Contreras∗ Jacek B. Krawczyk James Zuccollo May 9, 2007 Abstract Consider an electricity market populated by competitive agents using thermal generating units. ...
ABSTRACT Thermal generators’ emissions constitute an externality on which a regulator might wish ... more ABSTRACT Thermal generators’ emissions constitute an externality on which a regulator might wish to impose constraints. In addition, transmission capacity for sending energy may be naturally restricted by the grid facilities. Both pollution standards and transmission capacity impose constraints, coupling the strategies of the agents in their joint strategy space. To force competitive electricity generators to respect those constraints when individual monitoring is unavailable we envisage the regulator solving a generalised Nash equilibrium problem to establish an equilibrium in which the joint constraints are satisfied. If the regulator appropriately modifies the generators’ payoffs then they will play a decoupled game in which they can ignore the information on the joint constraints. For the payoff modification to induce the required behaviour a coupled constraints equilibrium needs to exist and be unique. We borrow from the Electrical Engineering (EE) literature a three-node network model that has these properties and use it in this paper to discuss and explain the behaviour of the agents subjected to the coupled constraints. We find that the imposition of transmission and environmental restrictions may increase the output share of an “inefficient” generator and decrease consumer surplus.
For pension-savers, a low payoff is a financial disaster. Such investors will most likely prefer ... more For pension-savers, a low payoff is a financial disaster. Such investors will most likely prefer left-skewed payoff distributions over right-skewed payoff distributions. We explore how such distributions can be delivered. Cautious-relaxed utility measures are cautious in ensuring that payoffs don’t fall much below a reference value, but relaxed about exceeding it. We find that the payoff distribution delivered by a cautious-relaxed utility measure has appealing features which payoff distributions delivered by traditional utility functions don’t. In particular, cautious-relaxed distributions can have the mass concentrated on the left, hence be left-skewed. However, cautious-relaxed strategies prescribe frequent portfolio adjustments which may be expensive if transaction costs are charged. In contrast, more traditional strategies can be time-invariant. Thus we investigate the impact of transaction costs on the appeal of cautious-relaxed strategies. We find that relatively high transaction fees are required for the cautious-relaxed strategy to lose its appeal. This paper contributes to the literature which compares utility measures by the payoff distributions they produce and finds that a cautious-relaxed utility measure will deliver payoffs that many investors will prefer.
Purpose The aim of this paper is to propose and analyse policies capable of generating left-ske... more Purpose The aim of this paper is to propose and analyse policies capable of generating left-skewed pension distributions. Such policies can deliver large pension values with high probability and hence are of interest to practical fund managers. Design/methodology/approach ...
This paper is about games where the agents face constraints in the combined strategy space (unlik... more This paper is about games where the agents face constraints in the combined strategy space (unlike in standard games where the action sets are defined separately for each player) and about computational methods for solutions to such games. The motivation examples for such games include electricity generation problems with transmission capacity constraints, environmental management to control pollution and internet switching to comply to buffers of bounded capacity. In each such problem a regulator may aim at compliance to standards or quotas through taxes or charges. The relevant solution concept for these games has been known under several names like generalised Nash equilibrium, coupled constraint equilibrium and more. Existing numerical methods converging to such an equilibrium will be explained. Application examples of use of NIRA, which is a suite of Matlab routines that implement one of the methods, will be provided.
Page 1. Electricity Market Games with Constraints on Transmission Capacity and Emissions Javier C... more Page 1. Electricity Market Games with Constraints on Transmission Capacity and Emissions Javier Contreras∗ Jacek B. Krawczyk James Zuccollo May 9, 2007 Abstract Consider an electricity market populated by competitive agents using thermal generating units. ...
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