A New Method for Equilibrium Selection in Financial Transmission Right's Auctions

Existence of Multiple equilibria in electricity markets, especially financial transmission right (FTR) auctions is the main cause of ambiguity in the markets' outcomes because in such situations, players do not have an efficient tool to deal with. In this paper, we introduce a new criterion for equilibrium selection in infinite games based on two new concepts of 'value' and 'chance'. These two are dependent concepts which are chosen carefully to reflect the role of expected payoff and risk of one strategy in measuring the players' incentives. The aforementioned method is then, applied on a FTR auction with two players on a three node test system.