Simulation as a Tool for Market Design

This paper describes the use of various forms of simulation as tools to for designing electricity markets. Our focus is on experimentation using computer-based agents that play the role of market participants by formulating bids to maximize their profits. They exercise their skills quickly and in a more controlled manner than simulations with real people, and because they maximize their profits agent-based simulation differs fundamentally from traditional production simulations. Analysis of this sort is significant because it allows for in-depth studies that stress test designs in the proposal stage, before they are used in practice