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 t he bidding process is developed and the generators are assumed to act ratio nally according to the "maximize expected utility" principle. The model and system objectives are interpreted as a classical control problem and resul ts, simulated and analytical, are presented. The results show that by intro ducing multiple bidding rounds, convergence to a Pareto optimum is possible if a proportional-integral control policy is introduced.