Capacity expansion under uncertainty in an oligopoly using indirect reinforcement-learning.

Oliveira, Fernando S.; Costa, Manuel L.G.

Abstract

We model capacity expansion in oligopolistic markets, with endogenous prices, under uncertainty, considering multiple production technologies. As this environment is complex, capacity expansion is the outcome of a learning process by individual firms. We propose indirect reinforcement-learning to model the interaction between price determination and capacity decisions, in the context of an oligopoly game. We apply our model to the analysis of the Iberian electricity market, considering multiple technologies, focusing on how subsidies, the prices of CO2 emissions and gas affect the capacity expansion policies.

Citation

OLIVEIRA, F.S. and COSTA, M.L.G. 2018. Capacity expansion under uncertainty in an oligopoly using indirect reinforcement-learning. European journal of operational research [online], 267(3), pages 1039-1050. Available from: https://doi.org/10.1016/j.ejor.2017.11.013

• Journal Article Type: Article
• Acceptance Date: Nov 8, 2017
• Online Publication Date: Dec 6, 2017
• Publication Date: Jun 16, 2018
• Deposit Date: Oct 21, 2023
• Publicly Available Date: Nov 15, 2023
• Journal: European journal of operational research
• Print ISSN: 0377-2217
• Electronic ISSN: 1872-6860
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 267
• Issue: 3
• Pages: 1039-1050
• DOI: https://doi.org/10.1016/j.ejor.2017.11.013
• Keywords: Oligopolies; Market analysis; Electricity market; Capacity expansion modelling
• Public URL: https://rgu-repository.worktribe.com/output/2079486