@InProceedings{ GatterbauerI2002:Counterexamples,
  author =      {Wolfgang Gatterbauer and Marija Ilic},
  title =       {Counterexamples to commonly held assumptions on unit commitment and market power assessment},
  year =        {2002},
  month = oct # {~14--15,},
  booktitle =   {Proceedings of the 34th Annual North American Power Symposium ({NAPS}~2002)},
  pages =       {219--225},
  location =    {Tempe, AZ, USA},
  publisher =   {IEEE},
  pdf =         {http://www.andrew.cmu.edu/user/gatt/download/naps2002_Unit_Commitment_Market_Power_Assessment.pdf},
  abstract =    {In the context of the ongoing deregulation of the electricity industry, we 
                 revisit the commonly held assumption that, under the condition of perfect 
                 information, a decentralized unit commitment would lead to the same power 
                 quantities traded and the same optimal social welfare as a centralized unit 
                 commitment. Taking operating cost independent of the output quantity into 
                 account, we show in the first part that meeting decentralized performance 
                 objectives of the individual market participants can lead to a lower 
                 efficiency than minimizing total operating cost in a decentralized way. 
                 This result concerns shortterm optimization, and does not consider 
                 long-term investment issues. In the second part, we use an abstract example 
                 to show that a generator owner’s optimum bid sequence for a centralized 
                 auction market can be above marginal cost even when there is no market 
                 power-related strategic bidding. We conclude that marginal production costs 
                 cannot be used as baseline for the assessment of market power in 
                 electricity markets as generators bid higher than MC because of 
                 intertemporal constraints and uncertainties about prices of consecutive 
                 hours.},
  keyword =     {market power, unit commitment, electricity prices, dispatch, market economics, electricity restructuring, efficiency, social welfare, decentralized optimization},
}