A Market-Based Optimization Algorithm for Distribution Systems

• Main Authors: GUO, Zhiling, KOEHLER, Gary J., WHINSTON, Andrew B.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2007
• Subjects: market-based; decomposition; algorithm; distributed systems; resource allocation; Databases and Information Systems; Numerical Analysis and Scientific Computing; Theory and Algorithms
• Online Access: https://ink.library.smu.edu.sg/sis_research/1863; https://doi.org/10.1287/mnsc.1060.0690
• Institution: Singapore Management University

In this paper, a market-based decomposition method for decomposable linear systems is developed. The solution process iterates between a master problem that solves the market-matching problem, and subproblems that solve the agents’ bundle-determination problems. Starting from any initial price and feasible allocation, system optimality can be achieved under a dynamic market-trading algorithm in a finite number of trades. The final market-clearing prices are discovered by this market trading and an efficient allocation is achieved by direct, wealth-improving resource exchanges among self-interested agents. Certain types of strategic behavior by the agents and a dealer in the marketplace are studied as well. Our proposed market mechanism addresses price dynamics, incentive issues, and economic transactions of real-world, distributed decision-making situations more realistically than traditional decomposition approaches. In addition, it can be operated in both synchronous and asynchronous environments. We provide a market-based paradigm for decentralized problem solving and information processing that can be easily implemented to support real-time optimization of distributed systems.