Congestion Management Games in Electricity Markets

This paper proposes a game-theoretic model to analyze the strategic behavior of incdec gaming in market-based congestion management (redispatch). We extend existing models by considering incomplete information about competitors’ costs and a finite set of providers. We find that inc-dec gaming is also a rational behavior in markets with high competition and with uncertainty about network constraints. Such behavior already occurs in our setup of two regions. Comparing market-based redispatch with three theoretical benchmarks highlights a lower efficiency level of market-based redispatch and inflated redispatch payments. Finally, we study seven variations of our basic model to assess whether different market fundamentals or market design changes mitigate incdec gaming. None of these variations eliminate inc-dec gaming entirely. 

Ehrhardt, Karl-Martin, Anselm Eicke, Lion Hirth, Fabian Ocker, Marion Ott, Ingmar Schlecht und Runxi Wang (2025), Congestion Management Games in Electricity Markets, ZEW Discussion Paper Nr. 25-044, Mannheim.