Application of games with incomplete information for pricing electricity in deregulated power pools

The authors present a game theory approach to the problem of pricing electricity in deregulated marketplaces. They assume that an independent operator receives bids by pool participants and defines transactions among participants by looking for the minimum price that satisfies the demand in the pool. The competition among pool participants is modeled as a noncooperative game with incomplete information. They assume that each pool participant knows its own operation costs but does not know his opponents' operation costs. The game, with incomplete information, is transformed into a game with complete, but imperfect, information and solved using the Nash equilibrium idea. The approach presented in this paper is geared towards providing support for pricing electricity in deregulated pools.