Published in:
Energy, Volume 134, pp. 984-990, September 2017
DOI: https://doi.org/10.1016/j.energy.2017.06.056
Abstract:
The energy markets are characterized by many agents simultaneously solving decision problems under uncertainty. It is argued that Monte Carlo simulations are not an adequate way to assess behavioral uncertainty; one should rather rely on stochastic modelling. Drawing on economics, decision theory and operations research, a simple guide on how to transform a deterministic energy market equilibrium model - where several agents simultaneously make decisions - into a stochastic equilibrium model is offered. With our approach, no programming of a stochastic solution algorithm is required.