MFG model with a long-lived penalty at random jump times: application to demand side management for electricity contracts

DOI10.1007/S10479-023-05270-0MaRDI QIDQ6358342zbMATH OpenFDO

Authors Clémence Alasseur, Luciano Campi, Roxana Dumitrescu, Jia Zeng

Publication date 15 January 2021

Mathematics Subject Classification ID

Consumer behavior, demand theory (91B42) Applications of stochastic analysis (to PDEs, etc.) (60H30) Stochastic games, stochastic differential games (91A15) Optimal stochastic control (93E20) Mean field games and control (49N80) Mean field games (aspects of game theory) (91A16) Contract theory (moral hazard, adverse selection) (91B41)

Abstract: We consider an energy system with $n$ consumers who are linked by a Demand Side Management (DSM) contract, i.e. they agreed to diminish, at random times, their aggregated power consumption by a predefined volume during a predefined duration. Their failure to deliver the service is penalised via the difference between the sum of the $n$ power consumptions and the contracted target. We are led to analyse a non-zero sum stochastic game with $n$ players, where the interaction takes place through a cost which involves a delay induced by the duration included in the DSM contract. When $noinfty$, we obtain a Mean-Field Game (MFG) with random jump time penalty and interaction on the control. We prove a stochastic maximum principle in this context, which allows to compare the MFG solution to the optimal strategy of a central planner. In a linear quadratic setting we obtain an semi-explicit solution through a system of decoupled forward-backward stochastic differential equations with jumps, involving a Riccati Backward SDE with jumps. We show that it provides an approximate Nash equilibrium for the original $n$-player game for $n$ large. Finally, we propose a numerical algorithm to compute the MFG equilibrium and present several numerical experiments.

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