A Novel Cournot Model of Electricity Market Considering Retailers' Strategic Behaviors

The recent electricity market reforms in China have led to a shift from supply-side competition to a more balanced market, with increased involvement from demand-side entities such as retailers, large consumers, and load aggregators. In this new context, both supply and demand sides' strategic behaviors will influence pricing, as opposed to the traditional model where the demand-side passively accepted prices. This study introduces a novel Cournot model that considers the strategic behaviors of retailers bidding on purchase budgets, thus reflecting their monopsony power. This model addresses the limitations of conventional approaches by integrating strategic interactions from both supply and demand sides, which are crucial in the evolving electricity market landscape. The model is solved using the nonlinear complementarity method, and numerical simulations demonstrate its effectiveness. The key findings indicate that retailers can lower market prices and increase profits by adjusting their budgets, affecting generator monopoly power and causing a shift in social welfare distribution. The research offers important insights for market regulators and enhances understanding of the interactions of competitive market participants in both supply and demand sides.