Defining and pricing capacity product in capacity markets

Capacity markets have been launched at several ISOs in the US. Many questions arise: Is a capacity market for missing money or reliability? What is a capacity product? How to price the capacity product? These questions are nontrivial and have been discussed in the literature mostly from the economics perspective. This paper attempts to address them from both economics and engineering perspectives. Such an interdisciplinary approach bridges the gap between economic theories and engineering practices in existing capacity markets.