Competitive bidding as a control problem

The dynamics and mechanisms of bidding by electricity generators to supply electricity to a national grid are investigated. A mathematical model for the bidding process is developed and the generators are assumed to act rationally according to the “maximize expected utility” principle. The model and system objectives are interpreted as a classical control problem and results, simulated and analytical, are presented. The results show that by introducing multiple bidding rounds, convergence to a Pareto optimum is possible if a proportional-integral control policy is introduced