Optimal Information Retrieval under Asymmetric Information in Constrained Power Markets

The problem of asymmetric information in electricity market is due to uncertainty in determining individual cost functions in assessing the participants´ bids. Individual loads or demand functions are assumed to be known to all participants. Based on the information asymmetry, it is proposed that individual generators may attempt to optimize their operating profits by making assumptions about the uncertain information. Each generator selects a supply bid curve as the best response to all simulated bidding scenarios. After observing the actual outcomes and performing sensitivity analysis from the most similar bidding scenario, the bids are adjusted for subsequent use. The optimality of the decisions may need to be altered by the power system constraints. The objective of the paper is to provide a possible way of extracting information from the bidding process rather than analyzing the strategic behavior of the generators.