Journal article
(Online publication)

Peak-Load Pricing on a Network

Publication Details
Author(s): Grimm V, Schewe L, Schmidt M, Zöttl G
Publisher: Taylor & Francis
Publication year: 2015
ISSN: 0233-1934


In this paper we analyze peak-load pricing in the presence of network constraints. In our setup, firms facing fluctuating demand decide on the size and location of production facilities. They make production decisions constrained by the invested capacities, taking into account that market prices reflect scarce transmission capacities. We state general conditions for existence and uniqueness of the market equilibrium and provide a characterization of equilibrium investment and production. The presented analysis covers the cases of perfect competition and monopoly - the case of strategic firms is approximated by a conjectural variations approach. Our result is a prerequisite for analyzing regulatory policy options with computational multilevel equilibrium models, since uniqueness of the equilibrium at lower levels is of key importance when solving these models. Thus, our paper contributes to an evolving strand of literature that analyzes regulatory policy based on computational multilevel equilibrium models and aims at taking into account individual objectives of various agents, among them not only generators and customers but also, e.g., the regulator deciding on network expansion.

How to cite
APA: Grimm, V., Schewe, L., Schmidt, M., & Zöttl, G. (2015). Peak-Load Pricing on a Network. Optimization Online.

MLA: Grimm, Veronika, et al. "Peak-Load Pricing on a Network." Optimization Online (2015).

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