Reformulations of a bi-level optimization problem detecting collusions in deregulated electricity markets

Official URL: https://risc01.sabanciuniv.edu/record=b2486371 _(Table of contents)

Main goal of deregulated electricity markets is to provide an environment with perfect competition among generation companies. Tacit collusion is considered as one of the main threats that may disrupt the competition in electricity markets operated by an independent system operator and increase the electricity price. In order to detect collusion opportunities in the market, we present reformulations for a gametheoretic bi-level optimization problem (Aliabadi et al. 2016). There exists no commercial solvers to directly solve a bi-level problem. First, we improve the existing equivalent reformulations of the problem (Çelebi et al. 2019). Then, we propose two new reformulations based on Karush–Kuhn–Tucker (KKT) conditions together with Active Set Theory, and Special Ordered Set (SOS) variables. Four groups of test instances with varying size are used to show and compare the efficiency and effectiveness of the reformulations in detecting collusive opportunities