Abbreviated Vita: Leigh Tesfatsion
- Ph.D., Economics (Major), Mathematics (Minor), University of Minnesota,
Minneapolis, MN, 1975, Thesis Co-Advisors: Clifford Hildreth and Leonid Hurwicz;
- B.A., History (Major),
Carleton College, Northfield, MN, 1968.
Current Professional Affiliations
- Professor Emerita of Economics, ISU, January 2018 to present.
- Courtesy Research Professor of Electrical & Computer Engineering, July 2020 to present.
- Associate Editor,
Journal of Energy Markets,
July 2007 to present.
- Scientific Committee,
International Journal of Microsimulation,
September 2015 to present.
- Advisory Board, Economic Policy in Complex Environments (EPOC), European Union (funded project), June 2020 to present.
- Senior Member,
Institute of Electrical and Electronics
Engineers (IEEE),
October 2018 to present.
- Member,
Experts Panel: Formation of a Transactive
Systems Hybrid Economic-Control Theory,
Transactive Systems Program, Pacific Northwest National Lab (PNNL), 2018 to present.
- Member,
International Scientific Advisory Council for the
Waterloo Institute for Complexity and Innovation (WICI), October 2011 to present.
- Member, IEEE Power and Energy (PES) Society, 2006 to present.
- Member,
Committee for the Status of Women in the Economics
Profession,
2001 to present.
- Member,
Society for Computational Economics (SCE),
1995 to present.
- Member, American Economic Association (AEA),
1975 to present.
- Contact Liaison for the
Society for Computational Economics (SCE)
Special Interest Group on Agent-Based
Computational Economics (ACE), Fall 1999 to present.
Past Professional Affiliations
- Research Professor of Economics, ISU, March 2018 through November 2023.
- Professor of Economics, ISU, 1990-2017
- Courtesy Professor of Mathematics, ISU, 1990-2017
- Courtesy Professor of Electrical & Computer Engineering, ISU, 2009-2017.
- Graduate Faculty Member,
ISU Human-Computer Interaction (HCI)
Graduate Program, 2003-2017.
- Professor of Economics, University of
Southern California, September 1989 through August 1990.
- Associate Professor of Economics,
University of Southern California, September 1981 through August 1989.
- Visiting Researcher, National Bureau of Economic Research, Cambridge, Massachusetts, Sept. 1981 -- Aug. 1982.
- Visiting Assistant Professor of Economics,
University of Minnesota, Minneapolis, March 1980 through August 1980.
- Assistant Professor of Economics,
University of Southern California, September 1975 through August
1981.
- Associate Editor,
Journal of Economic Dynamics and Control, Elsevier/North Holland, July 2000 through March 2018.
- Editorial Board,
Journal of Economic Interaction and Coordination, Springer, 2005 through 2017.
- Associate Editor,
Journal of Public Economic Theory,
Basil Blackwell, 1997 through 2006.
- Associate Editor,
IEEE Transactions on Evolutionary Computation, IEEE Neural Network Council, 1996 through 2002.
- Associate Editor, Applied Mathematics and Computation, Elsevier/North Holland, June 1991 to March 2008.
- Contributing Co-Editor (with Dan Ashlock), Complexity-at-Large Section,
Complexity,
John Wiley, 1997 through 2004.
- Guest Co-Editor (with Steve Widergren and Koen Kok), Special Issue on Transactive Energy,
IEEE Transactions on Power Systems, Vol. 34,
No. 5, September, 2019.
- Guest Editor,
Journal of Economic Dynamics and Control,
Special Double Issue on Agent-Based Computational Economics, Vol. 25, Nos. 3-4, March, 2001.
- Guest Editor,
Computational Economics,
Special Issue on Agent-Based Computational Economics,
Vol. 18, No. 1, October, 2001.
- Guest Editor,
IEEE Transactions on Evolutionary Computation,
Special Issue on Agent-Based Modeling of Evolutionary Economic Systems, Vol. 5, No. 5, October, 2001.
- Guest Editor,
Applied Mathematics and Computation,
Special Issue Dedicated to the Work of Robert E. Kalaba, Vol. 45, No. 2, Part II, September, 1991.
- Consultant,
Los Alamos National Laboratory,
from 2002 through 2004.
- Member,
Institute of Electrical and Electronics Engineers (IEEE), from 2005 to Oct 2008 upgrade to Senior Membership.
- Member,
Committee on Organizational Modeling from Individuals
to Societies,
National Research Council of the National Academies,
Washington D.C., March 2005--March 2008.
- Advisory Council Member (Elected),
Society for Computational Economics (SCE),
1/1997-12/2000, and 1/2002-12/2004.
Current Research Topics
Research Sites Maintained
General Resource Sites Maintained
Open Source Software Releases
- AMES Market Package (Open Source, Java/Python,
Homepage):
AMES (Agent-based Modeling of Electricity Systems) is an agent-based computational platform that permits the dynamic study of a U.S. RTO/ISO-managed wholesale power market operating over a high-voltage transmission grid during successive days, with grid congestion handled by Locational Marginal Pricing (LMP). The latest released version is
AMES V5.0 (GitHub Code/Data Repository)
- DCOPFJ (Open Source, Java,
Homepage):
A free open-source solver for bid/offer-based DC Optimal Power Flow (DCOPF) problems expressed as strictly convex quadratic programming problems.
-
Eight-Zone ISO-NE Test System (Open Source, Java/Python,
BitBucket Code/Data Repository):
The 8-Zone ISO-NE Test System, implemented in part by AMES V4.0, is a software platform based on ISO New England (ISO-NE) data and characteristics. It permits the dynamic study of an ISO-managed wholesale power market operating over an 8-zone transmission grid during successive days, with grid congestion handled by Locational Marginal Pricing.
-
ERCOT Test System (Open Source, Java/Python,
GitHub Code/Data Repository):
The ERCOT Test System is a software platform that permits the dynamic study of the ERCOT (Texas) ISO-managed wholesale power market operating over a high-voltage transmission grid during successive days, with grid congestion handled by Locational Marginal Pricing (LMP). The ERCOT Test System is implemented in part by AMES V5.0.
-
FLS (Open Source, Fortran,
Homepage):
Flexible Least Squares
is a multicriteria optimization method for model specification that does not require the imposition of problematic
distribution assumptions on specification errors. The FLS program is an implementation of the FLS method for time-varying linear regression.
-
GFLS (Open Source, Fortran,
Homepage):
Generalized Flexible Least
Squares is an implementation of FLS for approximately linear systems.
-
ITD Project/Household Formulation (Open Source, Python,
GitHub Code/Data Repository):
Python code/data for a household electrically connected to a distribution grid within an Integrated Transmission and Distribution (ITD) system. The household is able to participate in a bid-based Transactive Energy System (TES) design implemented within the ITD system.
-
ITD TES Platform V2 (Open Source, Java/Python/C++/C,
GitHub Code/Data Repository):
This co-simulation platform permits the modeling and implementation of an Integrated Transmission and Distribution (ITD) system operating over successive days. It has specifically been developed to facilitate performance testing of proposed bid-based Transactive Energy System (TES) designs implemented within ITD systems.
-
MAM (Open Source, Fortran,
Homepage):
The Multicriteria Associative Memory solver
is a nonlinear estimation method based on a multicriteria associative memory process.
-
NASA (Open Source, Fortran,
Homepage):
The Nonlocal Automated Sensitivity Analysis solver permits the automated tracking of solutions
for parameterized nonlinear systems along user-specified parameter paths.
-
The DMGame (Open Source, C++,
GitHub Code/Data Repository):
The Dynamic Macroeconomic Game is
an agent-based computational platform that implements the model developed in
Sinitskaya and Tesfatsion (JEDC, 2015)
for the study of dynamic macroeconomic systems as locally-constructive sequential games. Consumer and firm learning methods can range from simple reactive reinforcement learning to sophisticated anticipatory learning for the approximate achievement of intertemporal objectives.
-
TNGLab (Open Source, C++/VB,
Homepage):
The Trade Network Game Laboratory
is an agent-based computational platform that permits the
run-time visualization and quantitative study of dynamic network formation and behavioral game interactions among market buyers, sellers, and dealers. Each trader preferentially chooses and refuses its trading partners on the basis of past trading experiences.
-
WACCShed (Open Source, Java,
Bitbucket Code/Data Repository):
The Water And Climate Change Watershed platform is an agent-based computational platform that permits the study of water and climate change issues for watersheds modeled as coupled natural and human systems encompassing both rural and urban land areas.
Books and Monographs
-
Leigh Tesfatsion (2024), Economics of Grid-Supported Electric Power Markets: A Fundamental Reconsideration
(WP Preprint,pdf,1.2MB),
Foundations and Trends in Electric Energy Systems, Vol. 8, No. 1, NOW Publishers, Delft, The Netherlands, 123pp.
Note: The published full monograph (pdf) and individual monograph chapters (pdf) are available
here
from NOW Publishers for research, teaching, and/or private study purposes. See, also:
(KeyPoints,pdf);
(FERCTalkShort,pdf);
(FERCTalkLonger,pdf); and
(YouTube,FERCDay2,7:34:00).
-
Leigh Tesfatsion (2021), A New Swing-Contract Design for Wholesale Power Markets, John Wiley & Sons, Inc. (IEEE Press Series on Power Engineering), Hoboken, New Jersey, USA, 288pp.
(IEEEBookReview,pdf),
(FERCTalk,SlideSet,pdf),
(Wiley/IEEEPressBookFlyer,pdf).
- Leigh Tesfatsion and Kenneth L. Judd, eds. (2006), Handbook of Computational Economics: Volume 2, Agent-Based Computational Economics
(Contributors, Table of Contents, Chapter Abstracts),
Handbooks in Economics Series, North-Holland, Amsterdam. The published handbook (individual chapters, entire volume) is available for downloading at
Science Direct.
- Committee on Organizational Modeling from Individuals to Societies (2008), Behavioral Modeling and Simulation: From Individuals to Societies
(NAP Booksite),
National Research Council of the National Academies,
The National Academies Press,
Washington, D.C. (One of 13 Committee Member Co-Authors).
Journal, Proceedings, & Book Chapter Publications
-
Topic Listing:
Agent-Based Computational Economics (ACE)
ACE/ABM Surveys and Special Issue Introductions:
-
Leigh Tesfatsion (2023), "Agent-Based Computational Economics: Overview and Brief History"
(Preprint,pdf,170KB),
(KeynoteSSC,pdf,1.5MB),
Chapter 4 (pp. 41-58) in: Ragupathy Venkatachalam
(Ed.), Artificial Intelligence, Learning and Computation in Economics and Finance,
Springer Cham, 1st Edition, 325pp.
- Abstract:
Scientists and engineers seek to understand how real-world systems work and could work better. Any modeling method devised for such purposes must simplify reality. Ideally, however, the modeling method should be flexible as well as logically rigorous; it should permit model simplifications to be appropriately tailored for the specific purpose at hand. Flexibility and logical rigor have been the two key goals motivating the development of Agent-based Computational Economics (ACE), a completely agent-based modeling method characterized by seven specific modeling principles. This perspective provides an overview of ACE, a brief history of its development, and its role within a broader spectrum of experiment-based modeling methods.
- Wenwu Tang, Volker Grimm, Leigh Tesfatsion, Eric Shook, David Bennett, Li An, Zhaoya Gong, and Xinyue Ye (2020), "Code Reusability and Transparency of Agent-Based Modeling: A Review from a Cyberinfrastructure Perspective", Chapter 6 (pp. 115-134) in Wenwu Tang and Shaowen Wang (Eds.), High Performance Computing for GeoSpatial Applications, Vol. 23, Geotechnologies and the Environment Book Series, Springer.
- Abstract:
Agent-based models have been increasingly applied to the study of space-time dynamics in real-world systems driven by biophysical and social processes. For the sharing and communication of these models, code reusability and transparency play a pivotal role. In this chapter, we focus on code reusability and transparency of agent-based models from a cyberinfrastructure perspective. We identify challenges of code reusability and transparency in agent-based modeling and suggest how to overcome these challenges. As our findings reveal, while the understanding of and demands for code reuse and transparency are different in various domains, they are inherently related, and they contribute to each step of the agent-based modeling process. While the challenges to code development are daunting, continually evolving cyberinfrastructure-enabled computing technologies such as cloud computing, high-performance computing, and parallel computing tend to lower the computing-level learning curve and, more importantly, facilitate code reuse and transparency of agent-based models.
- Leigh Tesfatsion (2017), "Modeling Economic Systems as
Locally-Constructive Sequential Games"
[
(Preprint,pdf,654KB),
(SlideSet,pdf,1MB)],
Journal of Economic Methodology, Vol. 24, Issue 4, 384-409.
- Abstract:
Real-world economies are open-ended dynamic systems consisting of heterogeneous interacting participants. Human participants are decision-makers who strategically take into account the past actions and potential future actions of other participants. All participants are forced to be locally constructive, meaning their actions at any given time must be based on their local states; and participant actions at any given time affect future local states. Taken together, these essential properties imply real-world economies are locally-constructive sequential games. This paper discusses a modeling approach, Agent-based Computational Economics (ACE), that permits researchers to study economic systems from this point of view. ACE modeling principles and objectives are first concisely presented and explained. The remainder of the paper then highlights challenging issues and edgier explorations that ACE researchers are currently pursuing.
- Leigh Tesfatsion (2016), "Elements of Dynamic Economic Modeling: Presentation and Analysis"
(WP,pdf,630KB),
Eastern Economic Journal, Vol. 43, No. 2, 192-216. doi:10.1057/eej.2016.2
- Abstract:
The primary goal of these introductory notes is to promote the clear presentation and rigorous analysis of dynamic economic models, whether expressed in equation or agent-based form. A secondary goal is to promote the use of initial-value state space modeling with its regard for historical process, for cause leading to effect without the external imposition of global coordination constraints on agent actions. Economists who claim to respect individual rationality should not be doing for their modeled economic agents what in reality these agents must do for themselves.
-
Paul L. Borrill and Leigh Tesfatsion (2011), "Agent-Based Modeling: The Right Mathematics for the Social Sciences?"
(pdf,3.5MB),
pp. 228-258 in J.B. Davis and D.W. Hands (Eds.), Elgar Companion to Recent Economic Methodology, Edward Elgar Publishers, February, 560pp. ISBN-13: 9781848447547
- Abstract:
This study provides a basic introduction to agent-based modeling (ABM) as a powerful blend of classical and constructive mathematics, with a primary focus on its applicability for social science research.
The typical goals of ABM social science researchers are discussed along with the culture-dish nature of their computer experiments. The applicability of ABM for science more generally is also considered, with special attention to physics. Finally, two distinct types of ABM applications are summarized in order to illustrate concretely the duality of ABM: Real-world systems can not only be simulated with verisimilitude using ABM; they can also be efficiently and robustly designed and constructed on the basis of ABM principles.
- Leigh Tesfatsion (2011), "Agent-Based Modeling and Institutional Design"
(WP,411KB),
Eastern Economic Journal, Vol. 37, Issue 1,13-19.
- Abstract:
The recent economic crisis has led to calls for a comprehensive
restructuring of energy, financial, health care, and educational systems. Critics worry the restructuring of these complex institutional arrangements could produce adverse unintended consequences. Given these concerns, pre-testing of proposed changes is eminently desirable but also exceedingly difficult. This essay focuses on the potential use of agent-based modeling for studying proposed changes in institutional arrangements in advance of actual implementation. Ongoing agent-based research on the restructuring of electric power markets is used for
concrete illustration.
- Leigh Tesfatsion (2007), "Agent-Based Computational Economics,"
Scholarpedia
2(2):1970, entry upload year: 2007.
- Leigh Tesfatsion (2007), "Agents Come to Bits: Towards a Constructive Comprehensive Taxonomy of Economic Entities"
(pdf,112KB),
Journal of Economic Behavior and Organization, Vol. 63, Issue 2 (June), 333-346.
- Abstract: This essay is an invited comment on Philip Mirowski's
essay titled "Markets Come to Bits: Evolution, Computation, and Markomata in
Economic Science," also to appear in JEBO. In his usual brilliant and provocative
style, Mirowski argues for a constructive approach to economic modeling centered on the
computational representation of markets as integrated sets of algorithms that evolve over
time. This essay counters that a broader constructive approach to economic modeling can
and should be taken. The recent advent of powerful computer technologies supporting Agent-Based
Modeling (ABM) renders feasible the computational study of economies modeled as evolving systems
of interacting agents. In ABM, an "agent" refers broadly to bundled data and behavioral methods
representing an entity constituting part of a computationally constructed world. Examples of possible
agent referents include individuals, social groupings, institutions (e.g., markets), biological
entities such as crops, and physical entities such as transportation networks and weather. Consequently,
ABM provides tremendous opportunities for economists and other social scientists to tailor the breadth
and depth of the entities represented in their models to the application at hand. A simple ABM of a
two-sector decentralized market economy is used for concrete illustration.
- Leigh Tesfatsion (2006), "Agent-Based Computational Economics: A Constructive Approach to Economic Theory"
(pdf,253KB),
Introductory Chapter 16 (pp. 831-880) in Leigh Tesfatsion and Kenneth L. Judd
(Eds.), Handbook of Computational Economics, Volume 2: Agent-Based
Computational Economics
(Contributors and Contents),
Handbooks in Economics Series, North-Holland, Elsevier, Amsterdam, 831-880.
- Abstract: This chapter explores the potential
advantages and disadvantages of Agent-Based Computational Economics (ACE) for
the study of economic systems. General points are concretely illustrated
using an ACE model of a two-sector decentralized market economy. Six issues
are highlighted: Constructive understanding of production, pricing, and
trade processes; the essential primacy of survival; strategic rivalry and
market power; behavioral uncertainty and learning; the role of conventions
and organizations; and the complex interactions among structural attributes,
behaviors, and institutional arrangements.
- Leigh Tesfatsion (2003), "Agent-Based Computational Economics: Modeling Economies as Complex Systems"
(pdf,77KB),
Information Sciences, Vol. 149, Issue 4 (February), 262-268.
The published article is available from
Science Direct.
- Abstract: This much-shortened version of the
previous ACE survey was presented at the 2002 Joint Conference on Information
Sciences (JCIS).
- Leigh Tesfatsion (2002), "Economic Agents and Markets as Emergent Phenomena"
(pdf,167KB),
Proceedings of the National Academy of Sciences U.S.A., Vol. 99 (supp. 3), 7191-7192.
- Abstract: A brief overview of recent work in agent-based
computational economics is provided, with a stress on the research areas
highlighted at the NAS Sackler Colloquium session "Economic Agents and
Markets as Emergent Phenomena" held in October 2001 in Irvine, CA.
- Leigh Tesfatsion (2002), "Agent-Based Computational Economics: Growing Economies from the Bottom Up"
(pdf,212KB),
Artificial Life, Vol. 8, No. 1, 55-82.
A reprint of this article appears in Volume I (Part III) of K. Dopfer and J. Potts (Eds.), The New Evolutionary Economics, Edward Elgar Publishing, 2014.
- Abstract: This study is a much-extended version of my brief
PNAS article cited above. The main objectives and defining characteristics of
agent-based computational economics (ACE) are outlined, and similarities and
distinctions between ACE and artificial life research are clarified. Eight
ACE research areas are identified, and a number of publications in each area
are highlighted for concrete illustration. Open questions and directions for
future ACE research are also considered. The study concludes with a
discussion of the potential benefits of the ACE approach, as well as some
potential difficulties.
- Leigh Tesfatsion (2001), "Guest Editorial for the special issue of the IEEE Transactions on Evolutionary Computation on Agent-Based Modeling of Evolutionary Economic Systems"
(pdf,278KB),
Vol. 5, No. 5 (October), 437-441.
- Abstract: A brief overview of agent-based
computational economics (ACE) is provided, followed by synopses of the
articles included in the IEEE-TEC special issue on ACE. Additional
readings are also suggested.
- Leigh Tesfatsion (2001), "Introduction to the Computational Economics Special Issue on ACE"
(pdf,236KB),
Vol. 18, No. 1 (October), 1-8.
- Abstract: Following a brief discussion of ACE, this
introduction provides a synopses of the articles included in the CE
special issue on ACE.
-
Leigh Tesfatsion (2001), "Introduction to the Journal of Economic Dynamics and Control Special Issue on ACE"
(pdf,100KB),
Vol. 25, Nos. 3-4 (March), pp. 281-293.
The published article is available from
Science Direct.
- Abstract: Following a brief discussion of ACE, this
introduction provides a synopses of the articles included in the JEDC
special issue on ACE.
- Leigh Tesfatsion (2001), "Agent-Based Computational Economics: A Brief Guide to the Literature"
(pdf,217KB),
in Jonathan Michie (Ed.), Reader's Guide to the Social
Sciences, Vol. 1, Fitzroy-Dearborn, London, UK, March.
- Leigh Tesfatsion (1998), "Review of J. M. Epstein and R. Axtell, Growing Artificial
Societies: Social Science from the Bottom Up"
(pdf,35KB),
Journal of Economic Literature, Vol. XXXVI, March, 233-234.
- Leigh Tesfatsion (1997), "How Economists Can Get Alife,"
(pdf,560KB),
pp. 533-564 in W. Brian Arthur, Steven Durlauf, and David Lane (Eds.), The Economy as an Evolving Complex
System, II, Santa Fe Institute Studies in the Sciences of Complexity, Vol. XXVII, Addison-Wesley.
- Abstract: This study presents a summary overview of the basic
artificial life (alife) paradigm, stressing aspects especially relevant for
the study of decentralized market economies. In particular, recent work on a
Trade Network Game (TNG) framework combining evolutionary game play with
endogenous partner selection is used to illustrate how the alife paradigm
might be specialized to economics. Analytical and simulation work is
reported to show how the TNG is currently being used to study the
evolutionary implications of alternative market structures at three different
levels: individual trade behavior; trade network formation; and social
welfare.
- Leigh Tesfatsion (1997), "How Economists Can Get Alife: An Abbreviated Version"
(html).
- Abstract: This is a short summary of the previously
cited article that appeared in Arthur et al. (1997). It includes updated
references and updated website URLs.
ACE Macroeconomic Research:
-
Software Platform - The DMGame (Open Source, C++,
GitHub Code/Data Repository):
The Dynamic Macroeconomic Game is
an agent-based computational platform for the study of dynamic macroeconomic systems as locally-constructive sequential games. Consumer and firm learning methods can range from simple reactive reinforcement learning to sophisticated anticipatory learning for the approximate achievement of intertemporal objectives. The DMGame is used to generate all of the
test-case results reported in Sinitskaya and Tesfatsion (JEDC, 2015).
- Ekaterina Sinitskaya and Leigh Tesfatsion (2015), "Macroeconomies as Constructively Rational Games"
(WP,pdf,1.2MB),
Journal of Economic Dynamics and Control, Vol. 61, 152-182.
- Abstract: Real-world decision-makers are forced to be locally constructive; that is, their decisions are necessarily constrained by their interaction networks, information, beliefs, and physical states. This study transforms an otherwise standard dynamic macroeconomic model into an open-ended dynamic game by requiring consumers and firms with intertemporal utility and profit objectives to be locally constructive. Tested locally-constructive decision processes for the consumers and firms range from simple reactive reinforcement learning to adaptive dynamic programming (ADP). Computational experiments are used to explore macroeconomic performance under alternative decision-process combinations relative to a social planner benchmark solution. A key finding is that simpler decision processes can outperform more sophisticated decision processes such as ADP. However, memory length permitting some degree of adaptive foresight is critical for good performance.
- Blake LeBaron and Leigh Tesfatsion (2008), "Modeling Macroeconomies as Open-Ended Dynamic Systems of Interacting Agents"
(pdf,45KB),
American Economic Review (Papers & Proceedings), Vol. 98, No. 2, 246-250.
- Abstract: This study discusses the potential applicability of Agent-based Computational Economics (ACE) for macroeconomic modeling, with a particular stress on the following three issues: (1) taxonomy - what types of agents for macroeconomic models?; (2) scale robustness - how many agents for macroeconomic models?; and (3) empirical validation - connecting to data.
- Leigh Tesfatsion (2006), "Agent-Based Computational Modeling and Macroeconomics"
(pdf,148KB),
Chapter 9 in David Colander (Ed.), Post-Walrasian Macroeconomics: Beyond the Dynamic Stochastic General
Equilibrium Model, Cambridge University Press, Cambridge, UK. A
review of this book
was published in the Eastern Economic Journal (2008).
- Abstract: Agent-based Computational Economics (ACE) is the computational
study of economic processes modeled as dynamic systems of interacting agents. This
essay discusses the potential of ACE modeling tools for the study of macroeconomic systems.
Points are illustrated using an ACE model of a two-sector decentralized market economy.
ACE Labor Market Research:
- Mark Pingle and Leigh Tesfatsion (2003), "Evolution of Worker-Employer Networks and Behaviors Under Alternative
Non-Employment Benefits: An Agent-Based Computational Study"
(pdf,269KB),
(SlideSet,pdf,88KB),
pp. 256-285 in Anna Nagurney (Ed.), Innovations in Financial and Economic Networks, New Dimensions in Networks Book Series, Edward Elgar
Publishers.
- Abstract:
This study replaces the standard exogenously-given
worker-employer matching function with endogenous preferential worker-employer
matching based on past work-site experiences.
Workers and employers participate in a sequential employment game
with adaptive job search and incomplete contracts. Matched workers and
employers participate in a work-site game. The effects of a
non-employment payoff (NEP) on network formation and work-site behaviors are
systematically examined through computational experiments.
Taking both utility benefits and program costs into account, the highest efficiency is achieved
with a moderate NEP level. A zero NEP encourages too much shirking on the
work-site, while a high NEP results in too high a risk of lost earnings due
to coordination failure.
- Leigh Tesfatsion (2002), "Hysteresis in an Evolutionary Labor Market with Adaptive Search,"
(pdf,534KB),
pp. 189-210 in S.-H. Chen (Ed.), Evolutionary
Computation in Economics and Finance, Physica-Verlag Heidelberg, New
York.
- Abstract:
This study undertakes a systematic
experimental investigation of hysteresis (path dependency)
when workers and employers preferentially match based on past worksite experiences.
It is shown that two distinct hysteresis effects can arise,
network and behavioral, when workers and employers interact
strategically and evolve their worksite behaviors over time. These
hysteresis effects result in persistent heterogeneity in earnings and
employment histories across agents who have no observable structural
differences. At a more global level, these hysteresis effects are shown to
result in a one-to-many mapping between treatment factors and experimental
outcomes. These hysteresis effects may help to explain why excess earnings
heterogeneity is commonly observed in real-world labor markets.
- Leigh Tesfatsion (2001), "Structure, Behavior, and Market Power in an
Evolutionary Labor Market with Adaptive Search"
(pdf,295KB),
Journal of Economic Dynamics and Control, Vol. 25, Issues 3-4 (March), 419-457.
The published article is available from
Science Direct.
- Abstract:
This study undertakes a systematic
experimental investigation of the relationship between market power and labor
market structure (concentration and capacity conditions)
when workers and employers preferentially match based on past worksite experiences.
For each tested
market structure, workers and employers repeatedly seek preferred
worksite partners based on continually updated expected utility, engage in
efficiency-wage worksite interactions modeled as prisoner's dilemma games,
and evolve their worksite behaviors over time. A key finding is the presence
of strong learning and network effects. Each tested market structure maps
into a "spectral" distribution of observed interaction networks exhibiting
one dominant attractor (frequent network pattern) with one or two weaker
attractors (less frequent network patterns). Market structure is strongly
predictive for the relative market power of workers and employers
across all network attractors, but the magnitudes of the market power
levels attained by workers and employers vary widely across the network
attractors.
- Leigh Tesfatsion (2000), "Concentration, Capacity, and Market Power in an Evolutionary Labor Market"
(pdf,344KB),
pp. 1033-1040 in Evolution at Work for the New
Millenium, Proceedings of the 2000 Congress on Evolutionary Computation, Vol. II, IEEE, Inc., N.J., 1033-1040.
- This conference paper provides a summary overview of the detailed
experimental findings reported in my previously cited JEDC (2001) study.
- Leigh Tesfatsion (1998), "Preferential Partner Selection in Evolutionary Labor Markets: A
Study in Agent-Based Computational Economics"
(pdf,174KB),
pp. 13-24 in V. W. Porto, N. Saravanan, D. Waagen, and A. E. Eiben (Eds.), Evolutionary Programming
VII, Proceedings of the Seventh Annual Conference on Evolutionary
Programming, Springer-Verlag, Berlin.
- Abstract: This study develops a computational labor market
framework for studying the formation and evolution of contractual networks
between workers and employers. Resource-constrained workers and employers
choose and refuse contractual partners on the basis of continually updated
expected utility, engage in risky worksite interactions modelled as
two-person "efficiency-wage" prisoner's dilemma games, and evolve their
work-site strategies over time on the basis of past worksite earnings.
Illustrative computational experiments are reported and interpreted.
ACE Trade Network Game Research:
-
Software Platform - The TNGLab (Open Source, C++/VB,
Homepage):
The Trade Network Game Laboratory
is an agent-based computational platform that permits the
run-time visualization and quantitative study of dynamic network formation and behavioral game interactions among market buyers, sellers, and dealers. Each trader preferentially chooses and refuses its trading partners on the basis of past trading experiences.
- David McFadzean, Deron Stewart, and Leigh Tesfatsion (2001), "A Computational Laboratory for Evolutionary Trade Networks"
(pdf,508KB),
IEEE Transactions on Evolutionary
Computation, Vol. 5, No. 5, October, 546-560.
- Abstract: This report presents, motivates, and
illustrates the use of a computational laboratory for the investigation of
evolutionary trade network formation among strategically interacting buyers,
sellers, and dealers. The computational laboratory, referred to as the Trade
Network Game Laboratory (TNG Lab), is targeted for the Microsoft Windows
desktop. The TNG Lab is both modular and extensible and has a clear, easily
operated graphical user interface. It permits visualization of the formation
and evolution of trade networks by means of run-time animations. Data tables
and charts reporting descriptive performance statistics are also provided in
real time. The capabilities of the TNG Lab are demonstrated by means of
labor market experiments.
- An automatic installation program for the TNG Lab is available
online, as well as TNG Lab tutorials. See the
TNG Home Page
for further information.
- David McFadzean and Leigh Tesfatsion (1999), "A C++ Platform for the Evolution of Trade Networks"
(pdf,449KB),
Computational Economics, Vol. 14, 109-134.
The published article is available from
SpringerLink.
- Abstract: This study provides a detailed discussion of
the C++ implementation of the Trade Network Game (TNG), a computational
framework for studying the formation and evolution of trade networks in
buyer-seller markets modelled as decentralized systems of autonomous
interacting agents. The C++ source code is available online as freeware.
For further information, visit the
TNG Home Page.
- Leigh Tesfatsion (1998), "Gale-Shapley Matching in an Evolutionary Trade Network Game"
(pdf,230KB),
Economic Report No. 43, Iowa State University. Ames, IA.
- Abstract:
This study investigates the performance of Gale-Shapley matching in an evolutionary market context. Computational experimental findings are reported for an evolutionary match-and-play trade network game (TNG) in which resource-constrained traders repeatedly choose and refuse trade partners in accordance with Gale-Shapley matching, participate in risky trades modelled as two-person prisoner's dilemma games, and evolve their trade strategies over time. Particular attention is focused on correlations between ex ante market structure and the formation of trade networks, and between trade network formation and the types of trade behavior and social welfare outcomes that these trade networks support.
For additional information regarding TNG research articles and software, see the
TNG Home Page.
- David McFadzean and Leigh Tesfatsion (1997), "An Agent-Based Computational Model for the Evolution of Trade Networks"
(pdf,143KB),
pp. 73-83 in P. Angeline, R. Reynolds, J.
McDonnell, and R. Eberhart (Eds.), Evolutionary Programming VI,
Proceedings of the Sixth International Conference on Evolutionary
Programming, Springer-Verlag, Berlin.
- Abstract: This proceedings paper is a summary version
of the previously cited CE (1999) article. It briefly discusses the
computational (C++) implementation of the Trade Network Game (TNG).
- Leigh Tesfatsion (1997), "A Trade Network Game with Endogenous Partner Selection"
(pdf,401KB),
pp. 249-269 in H. M. Amman, B. Rustem, and A. B. Whinston
(Eds.), Computational Approaches to Economic Problems, Kluwer Academic
Publishers.
- Abstract: This study develops a Trade Network Game
(TNG) framework for studying the interplay between evolutionary game dynamics
and preferential partner selection in buyer-seller markets. The TNG consists
of successive generations of resource-constrained traders who choose and
refuse trade partners on the basis of continually updated expected payoffs,
engage in risky trades modelled as two-person games, and evolve their trade
strategies over time. Preliminary computer experiments are reported which
suggest that the standard optimality properties used to judge the
desirability of matching mechanisms in static market contexts may be inadequate measures of optimality from an evolutionary perspective.
- NOTE: For additional information regarding TNG research articles and software, see the
TNG Home Page.
ACE Learning Research:
-
Leigh Tesfatsion (2024), Learning via Criterion Filtering
(html),
Repository of research focusing on the direct updating of criterion functions (e.g., dynamic programming value functions).
-
Leigh Tesfatsion (1984),
"Games, Goals, and Bounded Rationality"
(pdf,734KB),
Theory and Decision,
Vol. 17, 149-175. The published article is available from
SpringerLink.
- Abstract: This article presents a generalization of the
standard N-person game with flexible information requirements suitable for
players constrained by certain types of bounded rationality. In particular,
strategies (complete contingency plans) are replaced with partial contingency
plans augmented by goals. Both utility and probability are conditioned on
selected goals and actions (g,a), and both are defined over the same set of
possible (g,a)-conditioned events.
Well-known existence theorems for Nash equilibria and Nash bargaining
solutions are extended to this context. For adaptive sequential games, the
symmetrical treatment of payoffs and probability assessments permits players
to learn their successive moves via "criterion filtering."
That is, the expected utility criterion function of
each player can be directly updated in each decision period via transitional
utility assessments in a manner analogous to Bayes' rule for updating
probability distributions via transitional probability assessments.
- Leigh Tesfatsion (1982), "A Dual Approach to Bayesian Inference and Adaptive Control"
(pdf,774KB),
Theory and Decision, Vol. 14, 1982, 177-194.
The published article is available from
SpringerLink.
- Abstract: This article surveys results established to
date for the "criterion filtering" approach to adaptive control
developed in
Tesfatsion (JOTA,1978).
Criterion filtering bypasses the usual preliminary updating of probability distributions via transitional
probability assessments (Bayes' rule) and focuses instead on the direct
updating of the criterion function via transitional return assessments.
- Leigh Tesfatsion (1980), "A Conditional Expected Utility Model for Myopic Decision Makers"
[
(Model,pdf,1.2MB)
and
(Axiomatization,pdf,788KB)],
Theory and Decision, Vol. 12, 185-206.
The published article is available from
SpringerLink.
- Abstract: This article formulates and axiomatizes a
conditional expected utility model that allows a decision maker to specify
his actions in the form of partial rather than complete contingency plans and
to simultaneously choose goals and actions in end-mean pairs. Both utility
and probability are conditioned on selected goals and actions (g,a), and both are
defined over the same set of possible (g,a)-conditioned events. For adaptive sequential decision
problems, this symmetrical treatment of utility and probability permits
agents to learn via "criterion filtering." That is, the expected utility
criterion function can be directly updated in
each decision period via transitional utility assessments in a manner
analogous to Bayes' rule for updating probability distributions via
transitional probability assessments.
- Leigh Tesfatsion (1979), "Direct Updating of Intertemporal Criterion Functions for a Class of
Adaptive Control Problems"
(pdf,2MB),
IEEE Transactions on Systems, Man, and
Cybernetics, Vol. SMC-9, No. 3 (March), 143-151.
- Abstract: This article extends the criterion filtering
approach originally developed in
Tesfatsion (JOTA,1978)
to intertemporal stochastic optimization problems. It demonstrates the
feasibility of directly updating dynamic programming value functions on the
basis of sequentially obtained return assessments, bypassing the need for
explicit probability updating via Bayes' rule. The performance of the method
for a class of adaptive control problems is systematically explored using
computational experiments.
- Robert E. Kalaba and Leigh Tesfatsion (1978), "Two Solution Techniques for Adaptive Reinvestment: A Small-Sample
Comparison", Journal of Cybernetics (now Cybernetics and Systems), Vol. 8, 101-111.
- Abstract: Two adaptive control techniques are compared
in the context of an adaptive reinvestment two-armed bandit problem. The
first solution is the Bayesian-dynamic programming approach. The distinctive
feature of the second solution technique -- the "criterion filtering"
technique -- is the direct estimation and updating of the criterion
function without recourse to explicit probability updating via Bayes' rule.
The control selections generated by the two solution techniques are shown to
closely approximate each other. An explanation for this close approximation
is provided by means of an equivalence theorem for control objective specification.
- Leigh Tesfatsion (1978),
"A New Approach to Filtering and Adaptive Control",
Journal of Optimization Theory and Applications (JOTA), Vol. 25, 247-261.
The published article is available from
SpringerLink.
- Abstract: A new approach to adaptive control is
proposed, referred to as criterion filtering. The principle
distinguishing feature of criterion filtering is the direct updating of the
current expected return function by means of a filtering operation on a
vector of past return functions. The data storage and computational problems
often associated with explicit probability updating via Bayes' rule are thus
avoided.
- Leigh Tesfatsion (1978), "A New Approach to Filtering and Adaptive Control: Stability Results"
(pdf,911KB),
Applied Mathematics and Computation, Vol. 4, No. 1, 27-44. The published article is available from
Science Direct.
- Abstract: In a companion study [Tesfatsion
(JOTA, 1978)] a new approach to adaptive control is proposed referred
to as "criterion filtering." The principle distinguishing feature of
criterion filtering is the direct updating of the current expected return
function by means of a filtering operation on a vector of past return
functions. In this paper convergence properties are established for a simple
linear criterion function filter designed for a class of adaptive control
problems typified by a well-known two-armed bandit problem.
- Leigh Tesfatsion (1977), "A New Approach to Filtering and Adaptive Control: Optimality
Results", Journal of Cybernetics (now Cybernetics and Systems), Vol. 7, 133-146.
- Abstract: In a companion study [Tesfatsion
(JOTA, 1978)], a new approach to adaptive control is proposed
referred to as "criterion filtering." The principle distinguishing feature
of criterion filtering is the direct updating of the current expected return
function by means of a filtering operation on a vector of past return
functions. In this paper sufficient conditions are established for control
variables selected in accordance with a simple linear criterion filter to
converge to a global maximum of the true criterion function. When states
depend nontrivially on control variable selection, the decision maker
determines the trade-off between rate of convergence and global optimality by
the choice of the greatest lower bound for the prior (initial period)
criterion function. When states are independent of control variable
selection, the asymptotic global optimality of control variable selections
holds under weak restrictions.
- Leigh Tesfatsion (1976), "Bayes' Theorem for Utility"
(pdf,867KB),
Discussion Paper 76-65, Center for Economic Research, University of Minnesota, Minneapolis, MN.
- Abstract:
This paper develops in depth the analogy between the direct updating of expected return functions on the basis of transitional return assessments and the use of Bayes' Rule to update probability distributions on the basis of transitional probability assessments.
- Leigh Tesfatsion (1975), "Two Essays on Individual Choice"
(pdf,2.5MB),
Thesis, Department of Economics, 76-15,007 University of Minnesota, December 1975. NOTE: A shortened version of this thesis was published in a 1980 Theory and Decision article, and a game theory extension of the theory developed in this thesis was published in a 1984 Theory and Decision article; see above for these two specific articles.
- Abstract:
This thesis formulates and axiomatizes an expected utility model of individual choice that allows a decision maker to specify his available actions in the form of "controls" (partial contingency plans) and to simultaneously choose goals and controls in end-mean pairs. It is shown that the Savage expected utility model, the Marschak-Radner team model, the Bayesian statistical decision model, and the standard optimal control model can all be viewed as special cases of this "goal-control expected utility model."
ACE Research on Dynamic Coupled Natural and Human Systems:
-
Software Platform - WACCShed (Open Source, Java,
Bitbucket Code/Data Repository):
The Water And Climate Change Watershed platform is an agent-based computational platform that permits the study of water and climate change issues for watersheds modeled as coupled natural and human systems encompassing both rural and urban land areas.
- Leigh Tesfatsion, Chris R. Rehmann, Diego S. Cardoso, Yu Jie, and William J. Gutowski (2017), "An Agent-Based Platform for the Study of Watersheds as Coupled Natural and Human Systems"
(Preprint,pdf,1.2M),
(code/data repository site),
Environmental Modelling & Software, Vol. 89 (March), 40-60. http://dx.doi.org/10.1016/j.envsoft.2016.11.021
- Abstract:
This study describes the architecture and capabilities of an open source agent-based Java platform, WACCShed, that permits the systematic study of interactions among hydrology, climate, and strategic human decision-making in a watershed over time. To demonstrate the platform's use and capabilities, an application is presented in accordance with ODD protocol requirements that captures, in simplified form, the structural attributes of the Ioway Creek Watershed in Central Iowa. Illustrative findings are reported for the sensitivity of farmer and city social welfare outcomes to changes in three key treatment factors: farmer land-allocation decision method, farmer targeted savings, and levee quality effectiveness for the mitigation of city flood damage.
-
Please Note:
-
A compact listing of my electricity market research, with linked preprints and slide-sets, can be found
here.
A Linked Swing-Contract Market Design for Wholesale Power Markets:
-
Leigh Tesfatsion (2024), "Economics of Grid-Supported Electric Power Markets: A Fundamental Reconsideration"
(WP,pdf,1.1MB),
(SlideSet,pdf,985KB),
(KeyPoints,pdf,205KB),
Foundations and Trends in Electric Energy Systems, Vol. 8, No. 1, NOW Publishers, Delft, The Netherlands, 123pp.
- Abstract:
U.S. centrally-managed wholesale power markets operating over high-voltage AC transmission grids are transitioning from heavy reliance on fossil-fuel based power to greater reliance on renewable power. This study highlights four
conceptually-problematic economic presumptions reflected in the legacy core design of these markets that are hindering this transition. The key problematic presumption is the static conceptualization of the basic transacted product as
grid-delivered energy (MWh) competitively priced at designated grid delivery locations during successive operating periods, supported by ancillary services. The study then discusses an alternative conceptually-consistent linked swing-contract market design that appears well-suited for the scalable support of increasingly decarbonized grid operations with more active participation by demand-side resources. This alternative design entails a fundamental switch to a dynamic insurance focus on
advance reserve procurement permitting continual balancing of real-time net load. Reserve consists of the guaranteed availability of diverse power-path production capabilities for possible centralized dispatch during future operating periods, offered by dispatchable power resources into centrally-managed linked forward reserve markets by means of two-part pricing swing contracts in firm or option form.
-
Leigh Tesfatsion (2021), A New Swing-Contract Design for Wholesale Power Markets
(IEEEBookReview,pdf),
(FERCTalk,SlideSet,pdf),
(Wiley/IEEEPressBookFlyer,pdf),
John Wiley & Sons, Inc. (IEEE Press Series on Power Engineering), Hoboken, New Jersey, USA, 288pp.
- Abstract:
This book promotes a linked swing-contract market design for centrally-managed wholesale power markets to facilitate increased reliance on renewable energy resources and demand-side participation. The proposed swing contracts are firm or option two-part pricing contracts permitting resources to offer the future availability of dispatchable power paths (reserve) with broad types of flexibility in their power attributes.
The book begins with a brief introduction to the subject, followed by two chapters that cover: general goals for wholesale power market design; history, operations, and conceptual concerns for current U.S. RTO/ISO-managed wholesale power markets; and the relationship of the present study to previous swing-contract research. The next eight chapters cover: a general swing-contract formulation for centrally-managed wholesale power markets; illustrative swing-contract reserve offers; inclusion of reserve offers with price swing; inclusion of price-sensitive reserve bids; and extension to a linked collection of swing-contract markets. Operations in current U.S. RTO/ISO-managed markets are reviewed in the following four chapters, and conceptual and practical advantages of the linked swing-contract market design are carefully considered. The book concludes with an examination of two key issues: How might current U.S. RTO/ISO-managed markets transition gradually to a swing-contract form? And how might independent distribution system operators, functioning as linkage entities at transmission and distribution system interfaces, make use of swing contracts to facilitate their participation in wholesale power markets as providers of ancillary services harnessed from distribution-side resources?
-
Shanshan Ma, Zhaoyu Wang, and Leigh Tesfatsion (2019), "Swing Contracts with Dynamic Reserves for Flexible Service Management"
(Preprint,pdf,1.4MB),
IEEE Transactions on Power Systems, Vol. 34, No. 5, 2019, 4024-4037. DOI: 10.1109/TPWRS.2018.2831924
- Abstract:
The increasing penetration of variable energy resources in modern electric power systems requires
additional flexibility in reserve provision to maintain reliable and efficient grid operations. However, full recognition and appropriate compensation of this flexibility is difficult to ensure within current power market designs due to rigidity in reserve definitions and requirements. This paper proposes a new mixed-integer linear programming (MILP) formulation for the optimal clearing of a day-ahead market based on swing contracts with dynamically updated regulation reserve zones. Five-bus and thirty-bus test cases are used to illustrate the effectiveness of the proposed new market design.
- Wanning Li and Leigh Tesfatsion (2018), "A Swing-Contract Market Design for Flexible Service Provision in Electric Power Systems"
(Preprint,pdf,463KB),
(SlideSet,pdf,694KB).
Chapter 5 (pp. 105-127) in: Sean Meyn, Tariq Samad, Ian Hiskens, and Jakob Stoustrup (Eds.), Energy Markets and Responsive Grids: Modelling, Control, and Optimization, The IMA Volumes in Mathematics and its Applications Series, Springer, 2018.
- Abstract:
The need for flexible service provision in electric power systems has dramatically increased due to the growing penetration of variable energy resources, as has the need to ensure fair access and compensation for this provision. A swing
contract (SC) facilitates flexible service provision because it permits multiple service attributes to be offered together in bundled form with each attribute expressed as a range of possible values rather than as a single point value. This paper discusses a new SC Market Design for electric power systems that permits SCs to be offered by any dispatchable resource. An analytical optimization formulation is developed for the clearing of an SC day-ahead market that can be implemented using any standard mixed integer linear programming (MILP) solver. The practical feasibility of the optimization formulation is demonstrated by means of a numerical example.
-
Deung-Yong Heo and Leigh Tesfatsion (2015), "Facilitating Appropriate Compensation of Electric Energy and Reserve through Standardized Contracts with Swing"
(Preprint,pdf,902KB),
Journal of Energy Markets, Vol. 8, Issue 4, December, 2015, 93-121.
-
Note: This Journal of Energy Markets article is a shortened revised version of the following workinig paper:
-
Deung-Yong Heo and Leigh Tesfatsion (2015), "Standardized Contracts with Swing for the Market-Supported Procurement of Electric Energy and Reserve: Illustrative Examples"
[
(WP,pdf,2.2MB),
(SlideSet,pdf,1.4MB)],
Economics Working Paper No. 13018, Department of Economics, Iowa State University, Original Version: November 2013. Latest Revision: June, 2015.
- Abstract:
Three key issues have arisen for centrally-managed wholesale electric power markets in Europe and the United States as they attempt to handle an increased penetration of variable energy resources. First, rigid definitions for energy and reserve products make it difficult to ensure appropriate compensation for important needed flexibility in start-up times, ramp-rates, power dispatch levels, and duration. Second, participation restrictions hinder the achievement of an even playing field for potential providers of flexible services. Third, reliance on out-of-market compensation for the provision of some valued services encourages strategic manipulation. This study examines the possibility of addressing these three issues through the introduction of standardized energy and reserve contracts with swing (flexibility) in their contractual terms. Concrete examples are used to demonstrate how the trading of these standardized contracts can be supported by linked forward markets in a manner that permits efficient real-time balancing of net load subject to system and reserve-requirement constraints. Comparisons with existing wholesale electric power markets are given, and key policy implications are highlighted.
- Leigh S. Tesfatsion, César A. Silva-Monroy, Verne W. Loose, James F. Ellison, Ryan T. Elliott, Raymond H. Byrne, and Ross T. Guttromson (2013), "New Wholesale Power Market Design Using Linked Forward Markets: A Study for the DOE Energy Storage Systems Program"
(pdf,1.8MB),
Sandia Report, SAND2013-2789, Unlimited Release, April, 2013.
- Abstract:
This report proposes a reformulation of U.S. ISO/RTO-managed wholesale electric power markets for improved reliability and efficiency of system operations. Current markets do not specify or compensate primary frequency response. They also unnecessarily limit the participation of new technologies in reserve markets and offer insufficient economic inducements for new capacity investment. In the proposed market reformulation, energy products are represented as physically-covered firm contracts and reserve products as physically-covered call option contracts. Trading of these products is supported by a backbone of linked ISO/RTO-managed forward markets with planning horizons ranging from multiple years to minutes ahead. A principal advantage of this reformulation is that reserve needs can be specified in detail, and resources can offer the services for which they are best suited, without being forced to conform to rigid reserve product definitions. This should improve the business case for electric energy storage and other emerging technologies to provide reserve. In addition, the facilitation of price discovery should help to ensure efficient energy/reserve procurement and adequate levels of new capacity investment.
Wholesale Power Market Operations:
- Software Platform - AMES Market Package (Open Source, Java/Python,
Homepage):
AMES (Agent-based Modeling of Electricity Systems) is an agent-based computational platform permitting the dynamic study of an ISO-managed wholesale power market operating over a high-voltage transmission grid during successive days, with grid congestion handled by Locational Marginal Pricing. The latest AMES release is
AMES V5.0 (GitHub Code/Data Repository)
- Software Solver - DCOPFJ (Open Source, Java,
Homepage):
A free open-source solver for bid/offer-based DC Optimal Power Flow (DCOPF) problems expressed as strictly convex quadratic programming problems.
-
Software Platform - Eight-Zone ISO-NE Test System (Open Source, Java/Python,
BitBucket Code/Data Repository):
The 8-Zone ISO-NE Test System, implemented in part by AMES V4.0, is a software platform based on ISO New England (ISO-NE) data and characteristics. It permits the dynamic study of an ISO-managed wholesale power market operating over an 8-zone transmission grid during successive days, with grid congestion handled by Locational Marginal Pricing.
-
Software Platform - ERCOT Test System (Open Source, Java/Python,
GitHub Code/Data Repository):
The ERCOT Test System is a software platform that permits the dynamic study of the ERCOT (Texas) ISO-managed wholesale power market operating over a high-voltage transmission grid during successive days, with grid congestion handled by Locational Marginal Pricing (LMP). The ERCOT Test System is implemented in part by AMES V5.0.
-
Leigh Tesfatsion (2024), "Locational Marginal Pricing: A Fundamental Reconsideration",
IEEE Open-Access Journal of Power and Energy, Vol. 11 (Feb), pp. 104-116. DOI: 10.1109/OAJPE.2024.3361751. The IEEE Xplore open-access posting of this refereed published paper is available
here.
- Abstract:
This study establishes that Locational Marginal Pricing (LMP) is conceptually problematic for grid-supported centrally-managed wholesale power markets transitioning to decarbonized grid operations with increasingly diverse participants, hence with increasingly uncertain and volatile net loads. LMP assigns a common per-unit price LMP(b,T) ($/MWh) to each next unit (MWh) of grid-delivered energy, conditional on delivery location b and delivery period T. However, this entails a serious many-to-one benefit/cost measurement error: namely, the valuation of this next unit by a market participant or system operator will typically depend strongly on the dynamic attributes of the path of power injections and/or withdrawals (MW) used to implement its delivery at b during T. One option is to muddle through, forcing market participants and system operators to express benefit/cost valuations for next units of grid-delivered energy in per-unit form without regard for the true benefits and costs of flexible power delivery. Another option, advocated in this study, is to explore conceptually-coherent nodal multi-interval pricing mechanisms permitting grids to function efficiently as flexibility-support insurance mechanisms, i.e., as mechanisms enabling just-in-time nodal power deliveries to meet just-in-time nodal power demands as well as system reliability requirements.
- Swathi Battula, Leigh Tesfatsion, and Thomas E. McDermott (2020), "An ERCOT Test System for Market Design Studies"
(WP,3.5MB),
(GitHub Code/Data Repository),
Applied Energy, Vol. 275, October, 2020.
DOI: 10.1016/j.apenergy.2020.115182
-
Abstract:
An open source test system is developed that permits the dynamic modeling of centrally-managed wholesale power markets operating over high-voltage transmission grids. In default mode, the test system models basic operations in the Electric Reliability Council of Texas (ERCOT): namely, centrally-managed day-ahead and real-time markets operating over successive days, with grid congestion handled by locational marginal pricing.
These basic operational features characterize all seven U.S. energy regions organized as centrally-managed wholesale power markets. Modeled participants include dispatchable generators, load-serving entities, and non-dispatchable generation such as unfirmed wind and solar power. Users can configure a broad variety of parameters to study basic market and grid features under alternative system conditions. Users can also easily extend the test system's Java/Python software classes to study modified or newly envisioned market and grid features. Finally, the test system is integrated with a high-level simulation framework that permits it to function as a software component within larger systems, such as multi-country systems or integrated transmission and distribution systems. Detailed test cases with 8-bus and 200-bus transmission grids are reported to illustrate these test system capabilities.
- Leigh Tesfatsion and Swathi Battula (2020), "Analytical SCUC/SCED Optimization Formulation for AMES V5.0"
(pdf,1MB),
Working Paper No. 20014, Economics Working Paper Series, Iowa State University, Ames, IA, 2020.
-
Abstract:
U.S. centrally-managed wholesale power markets currently rely on Security-Constrained Unit Commitment (SCUC) and Security Constrained Economic Dispatch (SCED) optimizations to determine unit commitments, reserve, and scheduled dispatch levels for generating units during future operating periods. AMES V5.0 is an open source Java/Python platform that implements a combined SCUC/SCED optimization capturing salient features of these actual market SCUC/SCED optimizations. This report provides extensive documentation for the analytical formulation of the AMES V5.0 SCUC/SCED optimization.
-
Wanning Li and Leigh Tesfatsion (2017), "An 8-Zone ISO-NE Test System with Physically-Based Wind Power"
(pdf,870KB),
Working Paper No. 17017, Economics Working Paper Series, Iowa State University, January 2017.
-
Abstract:
This study extends the agent-based 8-Zone ISO-NE
Test System to include wind turbine agents, each characterized
by location, physical type, and an output curve mapping local
wind speed into wind power output. Increases in wind power
penetration (WPP) are modeled as build-outs of investment
queues for planned wind turbine installations. The extended
system is used to study the effects of increasing WPP under
both stochastic and deterministic day-ahead market (DAM)
formulations for security-constrained unit commitment (SCUC).
For each tested WPP, the expected cost saving resulting from a
switch from deterministic to stochastic DAM SCUC is found
to display a U-shaped variation as the reserve requirement
(RR) for deterministic DAM SCUC is successively increased.
Moreover, the RR level resulting in the lowest expected cost
saving systematically increases with increases in WPP.
-
Dheepak Krishnamurthy, Wanning Li, and Leigh Tesfatsion (2016), "An 8-Zone Test System based on ISO New England Data: Development and Application,"
(Preprint with Revised Appendix,pdf,642KB),
(BitBucket code/data repository),
IEEE Transactions on Power Systems, Vol. 31, No. 1, January, 2016, 234-246.
-
Abstract:
This study develops an open-source 8-zone test system for teaching, training, and research purposes that is based on ISO New England structural attributes and data. The test system models an ISO-managed wholesale power market populated by a mix of generating companies and load-serving entities that operates through time over an 8-zone AC transmission grid. The modular extensible architecture of the test system permits a wide range of sensitivity studies to be conducted. To illustrate the capabilities of the test system, we report energy cost-savings outcomes for a comparative study of stochastic versus deterministic DAM Security Constrained Unit Commitment (SCUC) formulations under systematically varied reserve requirement levels for the deterministic formulation.
-
Wanning Li, Dheepak Krishnamurthy, and Leigh Tesfatsion (2015), "Systematic Testing and Comparison of Deterministic and Stochastic Unit Commitment in an 8-Zone Test Case Based on ISO New England Data"
(Poster,pdf,1.2KB),
Proceedings of the Innovative Smart Grid Technologies (ISGT) Conference, Washington, D.C., Feb. 17-20, 2015.
-
Abstract:
Systematic computational experiments are conducted using an 8-zone test system developed by the authors to investigate the relative performance of stochastic and deterministic Security-Constrained Unit Commitment (SCUC) formulations. Treatment factors include degree of wind power penetration, month of the year (load profile variability), and reserve requirements for the deterministic SCUC formulation.
-
Qun Zhou, Leigh Tesfatsion, Chen-Ching Liu, Ron F. Chu, and Wei Sun (2013), "A Nash Approach to Planning Merchant Transmission for Renewable Resource Integration"
(Preprint,pdf,772KB),
(IEEEXplore),
IEEE Transactions on Power Systems, Vol. 28, No. 3, August 2013, 2086-2100.
-
Abstract:
Major transmission projects are needed to integrate and to deliver renewable energy (RE) resources. Cost recovery is a serious impediment to transmission investment. A negotiation methodology is developed in this study to guide transmission investment for RE integration. Built on Nash bargaining theory, the methodology models a negotiation between an RE generation company and a transmission company for the cost sharing and recovery of a new transmission line permitting delivery of RE to the grid. Findings from a six-bus test case suggest that RE subsidies can be effectively used to achieve system optimality when RE prices are fixed through bilateral contracts but have limited ability to achieve system optimality when RE prices are determined through locational marginal pricing. This limitation needs to be recognized in the design of RE subsidies.
- Leigh Tesfatsion and Dionysios Aliprantis (2013), "Reformulation of U.S. Day-Ahead Wholesale Power Markets for Improved Intertemporal Operations"
(WP,pdf,440KB),
Economics Working Paper No. 12012, Department of Economics, Iowa State University, Latest Revision: April, 2013.
-
Abstract:
U.S. Day-Ahead Markets (DAMs) for wholesale electric power managed by Independent System Operators (ISOs) encompass more than 60% of U.S. generating capacity. The current design of these DAMs encourages a focus on decisions that minimize immediate net costs without explicit consideration of pre-DAM and post-DAM decision opportunities. This study proposes a practical DAM reformulation that enables a coupled consideration of past, current, and future energy/reserve procurement processes. The key innovation is the inclusion of ISO-determined virtual supply offers and virtual demand bids into the DAM
power balance equations that permit the ISO to plan to satisfy next-day balancing needs by an efficient mix of energy/reserve cleared before, during, and subsequent to the DAM. The
proposed reformulation is illustrated for three types of DAMs: a day-ahead energy market; a co-optimized day-ahead energy/reserve market; and a stochastic co-optimized day-ahead energy/reserve market.
-
James F. Ellison, Leigh S. Tesfatsion, Verne W. Loose, and Raymond H. Byrne (2012), "Project Report: A Survey of Operating Reserve Markets in U.S. ISO/RTO-Managed Electric Energy Regions"
(pdf,765),
SANDIA Report, SAND2012-1000, Sandia National Laboratories, Unlimited Release, September, 2012.
- Abstract:
This survey was undertaken as part of the initial phase of a larger market design project. The goal of the project is to design a wholesale electric power market such that electric energy storage (EES) resources are permitted to participate and receive compensation that is commensurate with the benefits they provide to the grid. This survey compares and contrasts operating reserve markets in the seven U.S. ISO/RTO-managed electric energy regions. The reserve market categories employed in each energy region are placed into a common framework.
The terminology used for reserve markets in each region, as well as the characteristics of these markets, is discussed. Finally, the market procedures currently in place in the seven energy
regions for the procurement, settlement, and allocation of costs for reserves are examined.
-
Hongyan Li and Leigh Tesfatsion (2012), "Co-Learning Patterns as Emergent Market Phenomena: An Electricity Market Illustration"
(Preprint,pdf,1.4MB),
Journal of Economic Behavior and Organization, Vol. 82, Issues 2-3, 2012, 395-419. The published article is available
here.
- Abstract:
The definition of emergence remains problematic, particularly for systems with purposeful human interactions. This study explores the practical import of this concept within a specific market context: namely, a double-auction market for wholesale electric power that operates over a transmission grid with spatially located buyers and sellers. Each profit-seeking seller is a learning agent that attempts to adjust its daily supply offers to its best advantage. The sellers are co-learners in the sense that their supply offer adjustments are in response to past market outcomes that reflect the past supply offer choices of all sellers. Attention is focused on the emergence of
co-learning patterns, that is, global market patterns that arise and persist over time as a result of seller co-learning. Examples of co-learning patterns include correlated seller supply offer behaviors and correlated seller net earnings outcomes. Heat maps are used to display and interpret co-learning pattern findings. One key finding is that co-learning strongly matters in this auction market environment. Sellers that behave as Gode-Sunder budget-constrained zero-intelligence agents, randomly selecting their supply offers subject only to a break-even constraint, tend to realize substantially lower net earnings than sellers that tacitly co-learn to correlate their supply offers for market power advantages.
-
Nanpeng Yu, Leigh Tesfatsion, and Chen-Ching Liu (2012), "Financial Bilateral Contract Negotiation in Wholesale Power Markets using Nash Bargaining Theory"
(Preprint,pdf,772KB),
IEEE Transactions on Power Systems Vol. 27, No. 1, 2012, 251-267.
- Abstract:
Bilateral contracts are important risk-hedging instruments constituting a major component in the portfolios held by many electric power market participants. However, bilateral contract negotiation is a complicated process because it involves risk management, strategic bargaining, and multi-market participation. This study analyzes a financial bilateral contract negotiation process between a generating company and a load-serving entity in a wholesale electric power market with congestion managed by locational marginal pricing. Nash bargaining theory is used to model a Pareto-efficient settlement point. The model predicts negotiation results under varied conditions and identifies circumstances in which the two parties might fail to reach an agreement. Both analysis and simulation are used to gain insight regarding how relative risk aversion and biased price estimates influence negotiated outcomes. These results should provide useful guidance to market participants in their bilateral contract negotiation processes.
-
Qun Zhou, Leigh Tesfatsion, and Chen-Ching Liu (2011),
"Short-Term Congestion Forecasting in Wholesale Power Markets"
(Preprint,pdf,295KB),
IEEE Transactions on Power Systems, Vol. 26, No. 4, 2011, 2185-2196.
- Abstract:
Short-term congestion forecasting is highly important for market participants in wholesale power markets that use Locational Marginal Prices (LMPs) to manage congestion. Accurate congestion forecasting facilitates market traders in bidding and trading activities and assists market operators in system planning. This study proposes a new short-term forecasting algorithm for congestion, LMPs, and other power system variables based on the concept of system patterns, i.e., combinations of status flags for generating units and transmission lines. The advantage of this algorithm relative to standard statistical forecasting methods is that structural aspects underlying power market operations are exploited to reduce forecast error. The advantage relative to previously proposed structural forecasting methods is that data requirements are substantially reduced. Forecasting results based on a NYISO case study demonstrate the feasibility and accuracy of the proposed algorithm.
-
Hongyan Li and Leigh Tesfatsion (2011), "ISO Net Surplus Collection and Allocation in Wholesale Power Markets Under Locational Marginal Pricing"
(Preprint,pdf,822KB),
(SlideSet,pdf,1.6MB),
IEEE Transactions on Power Systems, Vol. 26, No. 2, 2011, 627-641.
(DOI Location).
- Abstract:
This study uses 5-bus and 30-bus test cases to explore
ISO net surplus (congestion rent) collections and allocations
in wholesale power markets with grid congestion managed by
locational marginal prices (LMPs). Price-sensitivity of demand
and generator learning capabilities are taken as experimental
treatment factors. A key finding is that conditions resulting in
greater generator capacity withholding, hence higher and more
volatile LMPs, also result in greater ISO net surplus collections
that can be substantial in size. A key conclusion is that ISO net
surplus collections should be used pro-actively to mitigate the
conditions encouraging generator capacity withholding and hence
high and volatile LMPs rather than to provide ex post support
for LMP payment offsets and LMP volatility risk hedging as is
currently the norm.
- Hongyan Li, Junjie Sun, and Leigh Tesfatsion (2011), "Testing Institutional Arrangements via Agent-Based Modeling: A U.S. Electricity Market Application"
(Preprint,pdf,1.8MB),
pp. 135-58 in H. Dawid and W. Semmler (Eds.), Computational Methods in Economic Dynamics, Dynamic Modeling and Econometrics in Economics and Finance 13, Springer-Verlag Berlin Heidelberg, 2011.
- Abstract:
Many critical goods and services in modern-day economies are produced and distributed through complex institutional arrangements. Agent-based computational economics (ACE) modeling tools are capable of handling this degree of complexity. In concrete support of this claim, this study presents an ACE test bed designed to permit the exploratory study of restructured U.S. wholesale power markets with transmission grid congestion managed by locational marginal prices (LMPs). Illustrative findings are presented showing how spatial LMP cross-correlation patterns vary systematically in response to changes in the price responsiveness of wholesale power demand when wholesale power sellers have learning capabilities. These findings highlight several distinctive features of ACE modeling: namely, an emphasis on process rather than on equilibrium; an ability to capture complicated structural, institutional, and behavioral real-world aspects (micro-validation); and an ability to study the effects of changes in these aspects on spatial and temporal outcome distributions.
- Nanpeng Yu, Abhishek Somani, and Leigh Tesfatsion (2010), "Financial Risk Management in Restructured Wholesale Power Markets: Concepts and Tools"
(Preprint,pdf,477KB),
Proceedings of the IEEE Power and Energy Society General Meeting, Minneapolis, MN, July, 2010 (electronic).
- Abstract: The goal of this tutorial is three-fold: to facilitate cross-disciplinary communication among power engineers and economists by explaining and illustrating basic financial risk management concepts relevant for wholesale power markets (WPMs); to illustrate the complicated and risky strategic decision making required of power traders and risk managers operating in multiple interrelated submarkets comprising modern WPMs; and to briefly discuss the potential of agent-based modeling for the study of this decision making.
- Qun Zhou, Leigh Tesfatsion, and Chen-Ching Liu (2010), "Global Sensitivity Analysis for the Short-Term Prediction of System Variables"
(Preprint,pdf,297KB),
Proceedings of the IEEE Power and Energy Society General Meeting, Minneapolis, MN, July, 2010 (electronic).
- Abstract:
This study undertakes a global analysis of system variable sensitivities when LMPs are derived from DC optimal power flow solutions for day-ahead energy markets. The possible system states are first partitioned into subsets ("system patterns") based on relatively slow-changing attributes. It is next established analytically that there is a fixed linear-affine mapping between bus load patterns and corresponding system variables, conditional on a particular system pattern. It is then explained how this global piecewise linear-affine mapping can be used to predict system patterns corresponding to forecasted load patterns, hence also dispatch levels, LMPs, and line flows. A 5-bus case study is used to illustrate the accuracy of the proposed prediction method.
- Hongyan Li, Junjie Sun, and Leigh Tesfatsion (2009), "Separation and Volatility of Locational Marginal Prices in Restructured Wholesale Power Markets"
(Preprint,pdf,2.3MB),
ISU Economics Working Paper No. 09009, June, 2009.
- Abstract:
This study uses an agent-based test bed ("AMES") to investigate separation and volatility of locational marginal prices (LMPs) in an ISO-managed restructured wholesale power market operating over an AC transmission grid. Particular attention is focused on the dynamic and cross-sectional response of LMPs to systematic changes in demand-bid price sensitivities and supply-offer price cap levels under varied learning specifications for the generation companies. Also explored is the extent to which the supply offers of the marginal (price-determining) generation companies induce correlations among neighboring LMPs.
- Hongyan Li and Leigh Tesfatsion (2009), "Development of Open Source Software for Power Market Research: The AMES Test Bed"
(Preprint,pdf,561KB),
Journal of Energy Markets,
Vol. 2, No. 2, Summer 2009, 111-128.
- Abstract: Open Source Software (OSS) expresses the idea that
developers should be able to license the publication of their
software in a manner permitting anyone to freely use, modify,
and distribute the software. Today OSS is widely used in the
software industry, such as for language development tools (e.g.,
NetBeans for Java), office document processors (e.g., OpenOffice),
and operating systems (e.g., Linux, OpenSolaris). Yet OSS has
been slow to penetrate the power industry; heavy reliance is
still placed on closed-source commercial software packages. The
OSS in use tends to be for specialized purposes (e.g., circuit
design) rather than for the general-purpose analysis of power
systems. This study discusses potential benefits and drawbacks
of developing OSS for power market research, using the AMES
Wholesale Power Market Test Bed for concrete illustration.
-
Leigh Tesfatsion (2009), "Auction Basics for Wholesale Power Markets: Objectives and Pricing Rules"
(Preprint,pdf,504KB),
(SlideSet,pdf,450KB),
Proceedings of the IEEE Power and Energy Society General Meeting, Calgary, Alberta, CA, July 26-30, 2009 (electronic).
- Abstract: Power systems have distinctive features that greatly
complicate the development of auction designs. This study reviews
the theory and practice of auction design as it relates
specifically to U.S. restructured wholesale power markets, i.e.,
centrally-administered wholesale power markets with congestion
managed by locational marginal prices. Basic auction concepts
such as reservation value, net seller surplus, net buyer surplus,
competitive market clearing, market efficiency, market pricing
rules, supply offers, demand bids, strategic capacity withholding,
and market power are explained and illustrated. Complicating
factors specific to wholesale power markets are clarified, and
recent advances in computational tools designed to address these
complications are briefly noted.
-
Hongyan Li and Leigh Tesfatsion (2009), "The AMES Wholesale Power Market Test Bed: A Computational Laboratory for Research, Teaching, and Training"
(Preprint,pdf,930KB),
Proceedings of the IEEE Power and Energy Society General Meeting, Calgary, Alberta, CA, July 26-30, 2009 (electronic).
- Abstract:
Wholesale power markets around the world are currently undergoing a controversial restructuring of their architecture and rules of operation. Some commentators have argued that restructuring has not produced the intended improvements in market efficiency while at the same time it has complicated efforts to ensure reliability and fairness of operations.
This situation suggests the desirability of having publicly available test beds suitable for the objective study of this restructuring process. This study reports on the AMES Wholesale Power Market Test Bed. AMES is an open-source agent-based computational laboratory designed for the systematic study of restructured wholesale power markets operating over AC transmission grids subject to congestion. The AMES traders have learning capabilities permitting them to evolve their trading strategies over time. The potential usefulness of AMES for research, teaching, and training purposes is discussed and illustrated.
-
Haifeng Liu, Leigh Tesfatsion, and A. A. Chowdhury (2009), "Derivation of Locational Marginal Prices for Restructured Wholesale Power Markets"
(Preprint,pdf,294KB),
Journal of Energy Markets, Vol. 2, No. 1, Spring 2009, 3-27.
- Note: An abridged version
(Preprint)
of this paper appears in the Proceedings of the IEEE Power and Energy Society General Meeting, Calgary, CA, July 26-30, 2009 (electronic).
- Abstract:
Although Locational Marginal Pricing (LMP) plays an important role in many restructured wholesale power markets, the detailed derivation of LMPs as actually used in industry practice is not readily available. This lack of transparency greatly hinders the efforts of researchers to evaluate the performance of these markets. In this paper, different AC and DC optimal power flow (OPF) models are presented to help understand the derivation of LMPs. As a byproduct of this analysis, we are able to provide a rigorous explanation of the basic LMP and LMP-decomposition formulas (neglecting real power losses) presented without derivation in the business practice manuals of the U.S. Midwest Independent System Operator (MISO).
-
Qun Zhou, Leigh Tesfatsion, and Chen-Ching Liu (2009), "Scenario Generation for Price Forecasting in Restructured Wholesale Power Markets"
(Preprint,pdf,176KB),
Proceedings of the IEEE Power Systems & Exposition Conference, Seattle, WA, March 15-18, 2009 (electronic).
- Abstract:
In current restructured wholesale power markets, the short length of time series for prices makes it difficult to use empirical price data to test existing price forecasting tools and to develop new price forecasting tools. This study therefore proposes a two-stage approach for generating simulated price scenarios based on the available price data. The first stage consists of an Autoregressive Moving Average (ARMA) model for determining scenarios of cleared demands and scheduled generator outages (D&O), and a moment-matching method for reducing the number of D&O scenarios to a practical scale. In the second stage, polynomials are fitted between D&O and wholesale power prices in order to obtain price scenarios for a specified time frame. Time series data from the Midwest ISO (MISO) are used as a test system to validate the proposed approach. The simulation results indicate that the proposed approach is able to generate price scenarios for distinct seasons with empirically realistic characteristics.
-
Hongyan Li and Leigh Tesfatsion (2009), "Capacity Withholding in Restructured Wholesale Power Markets: An Agent-Based Test Bed Study"
(Preprint,pdf,2.3MB),
Proceedings of the IEEE Power Systems Conference & Exposition, Seattle, WA, March 15-18, 2009 (electronic).
- Abstract: This study uses a dynamic 5-bus test case implemented via the AMES Wholesale Power Market Test Bed to investigate strategic capacity withholding by generation companies (GenCos) in restructured wholesale power markets under systematically varied demand conditions. The strategic behaviors of the GenCos are simulated by means of a stochastic reinforcement learning algorithm motivated by human-subject laboratory experiments. The learning GenCos attempt to improve their earnings over time by strategic selection of their reported supply offers. This strategic selection can involve both physical capacity withholding (reporting of lower-than-true maximum operating capacity) and economic capacity withholding (reporting of higher-than-true marginal costs). We explore the ability of demand conditions to mitigate incentives for capacity withholding by letting demand bids vary from 100% fixed demand to 100% price-sensitive demand.
-
Abhishek Somani and Leigh Tesfatsion (2008), "An Agent-Based Test Bed Study of Wholesale Power Market Performance Measures"
(Preprint,pdf,2.8MB),
IEEE Computational Intelligence Magazine, Vol. 3, No. 4 (November), 2008, 56-72.
- Abstract: Wholesale power markets operating over transmission grids subject to congestion have distinctive features that complicate the detection of market power and operational inefficiency. This study uses a wholesale power market test bed with strategically learning traders to experimentally test the extent to which market performance measures commonly used for other industries are informative for the dynamic operation of restructured wholesale power markets. Examined measures include the Herfindahl-Hirschman Index (HHI), the Lerner Index, the Residual Supply
Index, the Relative Market Advantage Index, and the Operational Efficiency Index. It is also shown that the objective function commonly used to manage these markets deviates systematically from the standard economic measure of market efficiency when grid congestion is present.
- Hongyan Li, Junjie Sun, and Leigh Tesfatsion (2008), "Dynamic LMP Response Under Alternative Price-Cap and Price-Sensitive Demand Scenarios"
(Preprint,pdf,465KB),
Proceedings of the IEEE Power and Energy Society General Meeting, Pittsburgh, July 20-24, 2008 (electronic).
- Abstract: This study investigates the complicated nonlinear effects of demand-bid price sensitivity and supply-offer price caps on Locational Marginal Prices (LMPs) for bulk electric power when profit-seeking generators can learn over time how to strategize their supply offers. Systematic computational experiments are conducted using AMES, an open-source agent-based test bed developed by the authors. AMES models a restructured wholesale power market operating through time over an AC transmission grid subject to line constraints, generation capacity constraints, and strategic trader behaviors.
- Nanpeng Yu, Chen-Ching Liu, and Leigh Tesfatsion (2007), "Modeling of Suppliers' Learning Behaviors in an Electricity Market Environment"
(Preprint,pdf,277KB),
International Journal of Engineering Intelligent Systems, Vol. 15, Issue 2, 2007, 115-121.
- Abstract:
The Day-Ahead electricity market is modeled as a multi-agent system with interacting agents including supplier agents, Load Serving Entities and a Market Operator. Simulation of the market clearing results under the scenario in which agents have learning capabilities is compared with the scenario where agents report true marginal costs. It is shown that, with Q-Learning, electricity suppliers are making more profits compared to the scenario without learning due to strategic gaming. As a result, the LMP at each bus is substantially higher.
- Junjie Sun and Leigh Tesfatsion (2007), "Dynamic Testing of Wholesale Power Market Designs: An Open-Source Agent-Based Framework"
(Preprint,pdf,2.2MB),
Computational Economics, Vol. 30, Issue 3, 2007, 291-327. The published article is available at
SpringerLink.
- Abstract: In April 2003 the U.S. Federal Energy Regulatory Commission proposed a complicated market design -- the Wholesale Power Market Platform (WPMP) -- for common adoption by all U.S. wholesale power markets. Versions of the WPMP have been implemented in New England, New York, the mid-Atlantic states, the Midwest, the Southwest, and California. Strong opposition to the WPMP persists among some industry stakeholders, however, due largely to a perceived lack of adequate performance testing. This study reports on the model development and open-source implementation (in Java) of a computational wholesale power market organized in accordance with core WPMP features and operating over a realistically rendered transmission grid subject to congestion effects. The traders within this market model are strategic profit-seeking agents whose learning behaviors are based on data from human-subject experiments. Our key experimental focus is the complex interplay among structural conditions, market protocols, and learning behaviors in relation to short-term and longer-term market performance. Findings for a dynamic 5-node transmission grid test case are presented for concrete illustration.
It is shown for this example that generators easily learn to implicitly collude on higher-than-true marginal costs when the demand bids of load-serving entities take the form of fixed loads.
- Junjie Sun and Leigh Tesfatsion (2007), "An Agent-Based Computational Laboratory for Wholesale Power Market Design"
(Preprint,pdf,724KB),
Proceedings of the IEEE Power and Energy Society General Meeting, Tampa, Florida, June, 2007 (electronic).
- Abstract: This proceedings paper is an abridged version of ISU Economics Working Paper No. 06025 (see above). It reports on the model development and open-source implementation (in Java) of an agent-based computational wholesale power market organized in accordance with core FERC-recommended design features and operating over a realistically rendered transmission grid subject to congestion effects.
- Junjie Sun and Leigh Tesfatsion (2007), "DC Optimal Power Flow Formulation and Solution Using QuadProgJ"
(WP,pdf,521KB),
ISU Economics Working Paper No. 06014, Department of Economics, Iowa State University, Revised October 2007.
- Abstract:
Nonlinear AC Optimal Power Flow (OPF) problems are commonly approximated by linearized DC OPF problems to obtain real power solutions for restructured wholesale power markets. We first present a standard DC OPF problem, which has the numerically desirable form of a strictly convex quadratic programming (SCQP) problem when voltage angles are eliminated by substitution. We next augment this standard DC OPF problem in a physically meaningful way, still retaining an SCQP form, so that solution values for voltage angles and locational marginal prices are directly obtained along with real power injections and branch flows. We then show how this augmented DC OPF problem can be solved using QuadProgJ, an open-source Java SCQP solver newly developed by the authors that implements the well-known dual active-set SCQP algorithm by Goldfarb and Idnani (1983). To demonstrate the accuracy of QuadProgJ, comparative results are reported for a well-known suite of numerical QP test cases with up to 1500 decision variables plus constraints. Detailed QuadProgJ results are also reported for 3-node and 5-node DC OPF test cases taken from power systems texts and ISO-NE/MISO/PJM training manuals.
- Junjie Sun and Leigh Tesfatsion (2007), "Open-Source Software for Power Industry Research, Teaching, and Training: A DC-OPF Illustration"
(Preprint,pdf,115KB),
Proceedings of the IEEE Power and Energy Society General Meeting, Tampa, Florida, June, 2007 (electronic).
- Abstract: This proceedings paper is an abridged version of ISU Economics Working Paper No. 06014 (see above). It reports on the development and implementation of a stand-alone open-source Java solver for DC optimal power flow (DC-OPF) problems suitable for research, teaching, and training purposes. The DC-OPF solver is shown to match or exceed the accuracy of BPMPD (a proprietary third-party QP solver highly recommended by MatPower) when tested on a public repository of small to medium-sized QP problems. The capabilities of the DC-OPF solver are illustrated for a 5-node DC-OPF test case commonly used for training purposes.
- Deddy Koesrindartoto, Junjie Sun, and Leigh Tesfatsion (2005), "An Agent-Based Computational Laboratory for Testing the Economic Reliability of Wholesale Power Market Designs"
(Preprint,pdf,112KB),
Proceedings of the Power and Energy Society
General Meeting, San Francisco, California, June,
2005, 931-936.
- Abstract: Previous work by Koesrindartoto and
Tesfatsion (2004) reports on the development of an agent-based model for
exploring the economic reliability of the Wholesale Power Market Platform
proposed by FERC in April 2003. This paper reports on the Repast/Java
implementation of this model as an agent-based computational laboratory.
Initial experiments focusing on optimal power flow solution methods for the
day-ahead and real-time markets are discussed.
- Deddy Koesrindartoto and Leigh Tesfatsion (2004), "Testing the Reliability of FERC's Wholesale Power Market Platform: An
Agent-Based Computational Economics Approach"
(Preprint,pdf,45KB),
Energy, Environment, and Economics in a New Era, Proceedings of the
24th USAEE/IAEE North American Conference, Washington, D.C., July 8-10, 2004 (electronic).
- Abstract: In April 2003 the U.S. Federal Energy Regulatory
Commission (FERC) proposed the Wholesale Power Market Platform (WPMP) for
common adoption by U.S. wholesale power markets. The WPMP is a complicated
market design that has been adopted in some regions of the U.S. but resisted
in others on the grounds that its reliability has not yet been sufficiently
tested. This article reports on the development of an agent-based
computational framework for exploring the economic reliability of the WPMP.
The key issue under study is the extent to which the WPMP is capable of
sustaining efficient, orderly, and fair market outcomes over time despite
attempts by market participants to gain advantage through strategic pricing,
capacity withholding, and/or induced transmission congestion.
- James Nicolaisen, Valentin Petrov, and Leigh Tesfatsion (2001), "Market Power and Efficiency in a Computational Electricity Market with Discriminatory Double-Auction Pricing"
(Preprint,pdf,162KB),
(SlideSet,587KB),
IEEE Transactions on Evolutionary Computation, Vol. 5, No. 5 (October), 2001, 504-523.
The published article is available at
IEEEXplore (pdf,367KB).
- Abstract: This study reports experimental market power and
efficiency outcomes for a computational wholesale electricity market
operating in the short run under systematically varied concentration and
capacity conditions. The pricing of electricity is determined by means of a
clearinghouse double auction with discriminatory midpoint pricing. Buyers
and sellers use a modified Roth-Erev individual reinforcement learning
algorithm to determine their price and quantity offers in each auction round.
It is shown that high market efficiency is generally attained, and that
market microstructure is strongly predictive for the relative market power of
buyers and sellers independently of the values set for the reinforcement
learning parameters. Results are briefly compared against results from an
earlier electricity study in which buyers and sellers instead engage in
social mimicry learning via genetic algorithms.
Integrated Transmission and Distribution System Operations:
-
Software Platform - ITD TES Platform V2 (Open Source, Java/Python/C++/C,
GitHub Code/Data Repository):
This co-simulation platform permits the modeling and implementation of an Integrated Transmission and Distribution (ITD) system operating over successive days. It has specifically been developed to facilitate performance testing of proposed bid-based Transactive Energy System (TES) designs implemented within ITD systems.
-
Software Module - Household Component
for ITD TES Platform V2 (Open Source, Python,
GitHub Code/Data Repository):
Python code/data for a household electrically connected to a distribution grid within an Integrated Transmission and Distribution (ITD) system. The household is able to participate in a bid-based Transactive Energy System (TES) design implemented within the ITD system.
-
Rui Cheng, Leigh Tesfatsion, and Zhaoyu Wang (2023),
"A Consensus-Based Transactive Energy Design for Unbalanced Distribution Networks"
(IEEEPreprint,pdf,2.5MB),
(SlideSet,pdf,2.7MB),
IEEE Transactions on Power Systems, Vol. 38, No. 1 (January), 114-128.
-
Abstract:
This study develops a consensus-based transactive energy design managed by an Independent Distribution System Operator (IDSO) for an unbalanced distribution network. The network is populated by welfare-maximizing customers with price-sensitive and fixed loads who make multiple successive power decisions during each Operating Period (OP). The IDSO and customers engage in a negotiation process in advance of each OP to determine retail prices for OP that align customer power decisions with network constraints in a manner that preserves customer privacy. Convergence and optimality properties of this proposed design are established for an analytically formulated illustration: an unbalanced radial distribution network, populated by households, that is electrically connected to a relatively large
RTO/ISO-managed transmission network. Numerical test cases are reported for a 123-bus unbalanced radial distribution network that demonstrate these properties.
-
Leigh Tesfatsion, Zhaoyu Wang, and Subhonmesh Bose (2021),
"Market and Control Mechanisms Enabling Flexible Service Provision by Grid-Edge Resources within End-to-End Power Systems"
(pdf,4.3MB) ,
Final Project Report M-40, Power Systems Engineering Research Center (PSERC) Publication 21-12, October.
-
Abstract:
Modern electric power systems need new economic and control mechanisms to facilitate the provision of flexible ancillary services. This need arises in great part from an increasing reliance on renewable energy resources, which in turn has increased the uncertainty and volatility of net load, i.e., load net of non-dispatchable generation. In response to this need, our project has pursued four challenging objectives: (i) develop scalable transactive energy designs for power systems that enable the harnessing of flexible ancillary services from
locally-controlled grid-edge resources in return for appropriate compensation; (ii) analytically establish the optimality properties of these designs; (iii) develop a software platform modeling the dynamic operations of a transmission system linked with a distribution system; and (iv) use this platform to test design performance.
-
Swathi Battula, Leigh Tesfatsion, and Zhaoyu Wang (2020), "A Customer-Centric Approach to Bid-Based Transactive Energy System Design"
(IEEE Preprint,pdf,1.2MB),
(SlideSet,3.8MB),
IEEE Transactions on Smart Grid, Vol. 11, No. 6, 4996-5008. DOI: 10.1109/TSG.2020.3008611
-
Abstract:
This study demonstrates how bid-based transactive energy system designs can be formulated from a customer-centric vantage point to encourage voluntary customer participation. Supportive evidence is provided for distribution systems populated
by households with smart electric heating, ventilation and
air conditioning systems. The optimal form of a household's bid
function is first derived from dynamic programming principles,
based solely on the household's general thermal dynamic and
welfare attributes. The quantitative form of this optimal bid
function is then explicitly derived, given quantitative forms for these attributes. A method is also developed for the systematic construction of household types based on these attributes. Bid comparison, peak load reduction, and target load matching test cases conducted for a 123-bus distribution system illustrate the usefulness of these methods for ensuring
bid-based transactive energy system designs are able to align system goals and constraints with local customer goals and constraints.
-
Leigh Tesfatsion and Swathi Battula (2020), "Notes on the GridLAB-D Household Equivalent Thermal Parameter Model"
(WP,pdf,819KB),
WP #19001, Economics Working Paper Series, ISU Digital Repository, Iowa State University, Ames, IA, Latest Revision: July 2020.
-
Abstract:
GridLAB-D (GLD) is an agent-based platform, developed by researchers at Pacific Northwest National Laboratory, that permits users to accurately simulate the state
dynamics of power distribution systems at time scales ranging from sub-seconds to years. The purpose of this study is to present, in careful comprehensive form, a complete analytical state-space control representation for a version of the GLD Household Equivalent Thermal Parameter Model as support documentation for model users. This model is a physically-based implementation of a household with multiple price-responsive and conventional appliances whose thermal dynamics are determined over successive days by resident appliance usage and external weather conditions.
-
Hieu T. Nguyen, Swathi Battula, Rohit Reddy Takkala, Zhaoyu Wang, and Leigh Tesfatsion (2019), "An Integrated Transmission and Distribution Test System for Evaluation of Transactive Energy Designs"
(Preprint,pdf,1.9MB),
Applied Energy, Vol. 240, 666--679.
-
Abstract:
This study presents an open-source software platform specifically tailored to permit careful dynamic performance evaluation of transactive energy designs for end-to-end electric power systems. The platform models a centrally-managed wholesale power market operating over a transmission grid linked to one or more distribution systems, where each distribution system consists of a collection of grid-edge resources operating over a distribution grid. Test case findings are presented to illustrate the capabilities of the platform. The test cases implement a transmission system linked to a distribution system populated by households that have smart price-responsive appliances as well as conventional loads. Transactions at the distribution level are conducted in accordance with a well-known bid-based transactive energy design known as the PowerMatcher.
-
Leigh Tesfatsion (2018), "Electric Power Markets in Transition: Agent-Based Modeling Tools for Transactive Energy Support"
(Preprint),
Chapter 13 (pp. 715-766) in Cars Hommes and Blake LeBaron (Eds.), Handbook of Computational Economics 4: Heterogeneous Agent Models, Handbooks in Economics Series, North Holland (Elsevier), Amsterdam, The Netherlands.
-
Abstract:
Electric power systems consist of large numbers of heterogeneous participants interacting within an intricate layered network of economic and operational relationships. Decision-making in these systems has been extensively decentralized in many industrialized countries over the past twenty years in an attempt to increase their reliability and efficiency. Given the high negative impact of power disruptions, these decentralization efforts have typically been preceded by extensive sensitivity studies with empirically-based computational models. This chapter discusses the current and potential use of agent-based computational modeling to develop novel transactive energy system (TES) designs for electric power systems. TES designs are decentralized market-based designs that permit electric power systems to operate more fully in accordance with basic economic principles while maintaining overall system reliability and efficiency.
-
Auswin G. Thomas and Leigh Tesfatsion (2018), "Braided Cobwebs: Cautionary Tales for Dynamic Pricing in Retail Electric Power Markets"
(Preprint,pdf,546KB),
IEEE Transactions on Power Systems, Vol. 33, No. 6, 2018, 6870-6882. Digital Object Identifier: 10.1109/TPWRS.2018.2832471
-
Abstract:
This study investigates the effects of dynamic-price retail contracting on integrated retail and wholesale (IRW) power market operations. Performance is evaluated by means of carefully defined metrics for system stability and market participant welfare. The study is carried out for an IRW Test Case for which 500 households have price-responsive air-conditioning systems. It is shown that dynamic-price retail contracting can give rise to braided cobweb dynamics consisting of two interwoven cycles for power and price levels exhibiting either stability or instability depending on system conditions. Moreover, even in stable cases, dynamic-price retail contracts generally result in worse welfare outcomes for households than flat-rate retail contracts.
-
Auswin G. Thomas, Pedram Jahangiri, Di Wu, Chengrui Cai, Huan Zhao, Dionysios C. Aliprantis, and Leigh Tesfatsion (2012), "Intelligent Residential Air-Conditioning System with Smart-Grid Functionality"
(Preprint,pdf,339KB),
IEEE Transactions on Smart Grid, Vol. 3, No. 4 (December), 2012, 2240-2251.
-
Abstract: This paper sets forth a novel intelligent residential air-conditioning (A/C) system controller that has smart grid functionality. The qualifier “intelligent" means the A/C system has advanced computational capabilities and uses an array of environmental and occupancy parameters in order to provide optimal intertemporal comfort/cost trade-offs for the resident, conditional on anticipated retail energy prices. The term "smartgrid functionality" means that retail energy prices can depend on wholesale energy prices. Simulation studies are used to demonstrate the capabilities of the proposed A/C system controller.
-
Pedram Jahangiri, Di Wu, Wanning Li, Dionysios C. Aliprantis, and Leigh Tesfatsion (2012), Development of an Agent-Based Distribution Test Feeder with Smart-Grid Functionality
(Preprint,pdf,386KB),
Proceedings of the IEEE Power and Energy Society General Meeting, San Diego, CA, July 22-26, 2012 (electronic).
-
Abstract:
This paper reports on the development of an agent-based distribution test feeder with smart-grid functionality. The
test feeder is based on an actual distribution feeder with various
additional features incorporated, including rooftop photovoltaic
generation and price-responsive loads (e.g., plug-in electric vehicles
and intelligent air-conditioning systems). This work aims
to enable the integrated study of wholesale electric power
markets coupled with detailed representations of the retail-side
distribution systems.
-
Auswin George Thomas, Chengrui Cai, Dionysios C. Aliprantis, and Leigh Tesfatsion (2012), Effects of Price-Responsive Residential Demand on Retail and Wholesale Power Market Operations
(Preprint,pdf,218KB),
Proceedings of the IEEE Power and Energy Society General Meeting, San Diego, CA, July 22-26, 2012 (electronic).
-
Abstract:
This paper describes a computational platform for
studying the effects of price-responsive residential demand for
air-conditioning (A/C) on integrated retail and wholesale power
market operations. The physical operations of the A/C system
are represented by means of the physics-based equivalent
thermal parameter model. Residential A/C energy usage levels
are determined by means of a stochastic dynamic-programming
optimization in which the daily comfort attained by the resident
is optimally traded off against his daily energy costs, conditional
on retail energy prices, environmental conditions, and A/C
operational constraints. An example is provided to illustrate
the dynamic feedback loop connecting residential A/C load, the
energy prices determined at wholesale conditional on A/C load,
and the retail energy prices offered to residential A/C consumers
by wholesale energy buyers.
-
Chengrui Cai, Pedram Jahangiri, Auswin George Thomas, Huan Zhao, Dionysios C. Aliprantis, and Leigh Tesfatsion (2011), "Agent-Based Simulation of Distribution Systems with High Penetration of Photovoltaic Generation"
(Preprint,pdf,433KB),
Proceedings of the IEEE Power and Energy Society General Meeting, Detroit, MI, 2011 (electronic).
- Abstract:
This paper discusses the development of an agent-based test bed
permitting the integrated study of retail and wholesale power markets operating over realistically rendered transmission and distribution systems. A key issue to be addressed using this test bed is the dynamic effect of increased penetration of consumer-owned distributed energy resources, such as PV generation, particularly when coupled with increased price-sensitivity of demand as realized through demand response, demand dispatch, and/or price-sensitive demand bidding.
-
Huan Zhao, Auswin George Thomas, Pedram Jahangiri, Chengrui Cai, Leigh Tesfatsion, and Dionysios C. Aliprantis (2011), "Two-Settlement Electric Power Markets with Dynamic-Price Customers"
(Preprint,pdf,64KB),
Proceedings of the IEEE Power and Energy Society General Meeting, Detroit, MI, 2011 (electronic).
- Abstract:
This study will report both analytical and computational test bed findings regarding the effects of retail dynamic-price contracting on power system operations. The key issue under study is the extent to which the introduction of dynamic price contracts for retail consumers affects the efficiency of both retail and wholesale power market operations through changes in price volatility and load profiles at wholesale, and through re-allocations of risk between load-serving entities and retail consumers.
-
Dionysios Aliprantis, Scott Penick, Leigh Tesfatsion, and Huan Zhao (2010), "Integrated Retail and Wholesale Power System Operation with Smart-Grid Functionality"
(Preprint,pdf,518KB),
Proceedings of the IEEE Power and Energy Society General Meeting, Minneapolis, MN, July 2010.
- Abstract:
This paper reports on the development of an agent-based test bed for the integrated study of retail and wholesale power markets operating over transmission and distribution networks with smart-grid functionality. This test bed links together two existing test beds, the AMES Wholesale Power Market Test Bed and the GridLAB-D electric energy distribution platform. As a first step, an integrated retail/wholesale market module has been designed based specifically on the ERCOT (Texas) energy region, and a simplified version of this module is being used to study potential retail consumer response to real-time-pricing contracts supported by advanced metering. This study reports on the latter work.
- Dionysios Aliprantis, Leigh Tesfatsion, and Huan Zhao (2010), "An Agent-Based Test Bed for the Integrated Study of Retail and Wholesale Power System Operations"
(Preprint,pdf,397KB),
Proceedings of the First International Workshop on Agent Technologies for Energy Systems (ATES 2010),
Toronto, Canada, May 11, 2010 (electronic).
- Abstract:
This paper provides a brief overview of a challenging new project: the linking together of two agent-based test beds to permit the integrated study of retail and wholesale power system operations.
- Steve Widergren, Junjie Sun, and Leigh Tesfatsion (2006), "Market Design Test Environments"
(Preprint,pdf,136KB),
Proceedings of the IEEE Power and Energy Society General
Meeting, Montreal, June, 2006 (electronic).
- Abstract: Power industry restructuring continues
to evolve at multiple levels of system operations. At the bulk electricity
level, several organizations charged with regional system operation are
implementing versions of a Wholesale Power Market Platform (WPMP) in response
to U.S. Federal Energy Regulatory Commission initiatives. Recently the Energy
Policy Act of 2005 and several regional initiatives have been pressing the
integration of demand response as a resource for system operations. These
policy and regulatory pressures are driving the exploration of new market
designs at the wholesale and retail levels. The complex interplay among
structural conditions, market protocols, and learning behaviors in relation
to short-term and longer-term market performance demand a flexible computational
environment where designs can be tested and sensitivities to power system and market
rule changes can be explored. This paper discusses the use of agent-based
computational methods for the study of electricity markets at the wholesale and
retail levels, and explores distinctions in problem formulation between these levels.
Efficiency and Aggregation Issues in Overlapping Generations Models
- Mark Pingle and Leigh Tesfatsion (1998), "Active Intermediation in a Monetary Overlapping Generations Economy"
(pdf,225KB),
Journal of Economic Dynamics and
Control, Vol. 22, 1998, 1533-1574.
The published article is also available from
Science Direct.
- Abstract: Why does the First Welfare Theorem fail in
standard monetary overlapping generations economies such as Grandmont
(Econometrica,1985), and how is this failure related to business cycle
fluctuations? This study argues that the failure of the First Welfare
Theorem, and the potentially exotic nature of the business cycle fluctuations
that arise, can both be attributed to the passive intermediation role played
by the Walrasian Auctioneer in these models. Specifically, the study
demonstrates that when private intermediaries pursuing normal
profit-maximizing activities are introduced into such models, a Pareto
efficient outcome is ensured and only simple periodic types of business cycle
fluctuations can occur in equilibrium.
- Mark Pingle and Leigh Tesfatsion (1998), "Active Intermediation in Overlapping Generations Economies with Production and Unsecured Debt"
(pdf,187KB),
Macroeconomic Dynamics, Vol. 2, 1998, 183-212.
- Abstract: Why does the First Welfare Theorem fail in
standard overlapping generations economies with production, such as Diamond
(AER, 1965) and Tirole (Econometrica, 1985)? This study argues
that the reason for this failure can be attributed to the passive
intermediation role played by the Walrasian Auctioneer in these models.
Specifically, the study demonstrates that when intermediation is instead
modeled as a contestable activity carried out by corporate intermediaries
owned by consumer-shareholders and operated in their interest, every
equilibrium is Pareto efficient.
- Mark Pingle and Leigh Tesfatsion (1997), "Walras' Law in Overlapping Generations Economies"
(pdf,68KB),
Economic Report No. 34, Iowa State University, revised
October 1997.
- Abstract: It is widely known that Walras' Law can fail
for an overlapping generations economy. This report demonstrates that: (1)
when this failure occurs, it represents an economic opportunity that can be
exploited by the issuance of unsecured debt by private agents; and (2) when
unsecured debt is issued, Walras' Law does not fail.
- Peter Orazem and Leigh Tesfatsion (1997), "Macrodynamic Implications of Income-Transfer Policies for Human Capital Investment and School Effort", Journal of Economic Growth, Vol. 2, November, 1997, 305-329. The published article is available from
SpringerLink.
This article is a revised abridged version of P. Orazem and L. Tesfatsion, "Human Capital Investment and the Locally Rational Child"
(pdf,534KB),
Economic Report No. 31, Iowa State University, March 1997.
- Abstract: What happens when children are able to affect
the productivity of human capital investment by endogenously varying the
degree of effort they exert in school? This study explores the effectiveness
of tax-financed human capital investment for the education of children when
the intensity of effort which children devote to schooling depends on their
expected rate of return as proxied by the rate of return experienced by their
parents. The context of the investigation is an overlapping generations
model consisting of multiple dynastic families with randomly
determined ability levels. The main finding is that endogenous schooling
effort choices by children can distort the intended effects of
government income transfers meant to counter the imperfect access of
poor families to credit markets.
- Mark Pingle and Leigh Tesfatsion (1991), "Overlapping Generations, Intermediation, and the First Welfare Theorem"
(pdf,1.4MB),
Journal of Economic Behavior and Organization, Vol. 15, 1991, 325-345.
The published article is available from
Science Direct.
- Abstract: Why does the First Welfare Theorem fail in
standard pure-exchange overlapping generations economies such as Samuelson
(Journal of Political Economy, 1958)? This study argues that the
failure can be attributed to the passive intermediation role played by the
Walrasian Auctioneer in these models. Specifically, no agent actually
residing within the model is permitted to exploit the earnings opportunities
that can arise from mediating intertemporal trade. The study shows that the
introduction of active profit-seeking private intermediaries in such
models restores the First Welfare Theorem.
- Leigh Tesfatsion (1984), "Welfare Implications of Net Social Security Wealth"
(pdf,1.4MB),
Journal of Public Economics , Vol. 24, Issue 1,
1984, 1-27.
The published article is available from
Science Direct.
- Abstract: Real net social security wealth (NSSW), the
real present value of social security benefits received minus social security
taxes paid, is frequently used as a direct proxy measure for the impact of a
social security system on generation welfare. This article examines the
relationship between real NSSW and generation welfare in a 3-period lived
overlapping generations economy. It demonstrates that NSSW can be a very
poor proxy for the effects of a social security system on generation welfare.
For example, NSSW can actually be negatively correlated with welfare
for every generation due to price distortion effects.
- Leigh Tesfatsion (1982), "Macro Implications of Government Redistributive Tax-Transfer Policies"
(pdf,1.6MB),
Journal of Public Economics, Vol. 19, Issue 2,
November, 1982, 139-169.
The published article is available from
Science Direct.
- Abstract: Aggregation conditions permitting macro
variables to be expressed as functions of other macro variables have long
been sought in macroeconomics. For example, conditions have been sought
permitting aggregate consumption to be expressed as a function of aggregate
income, independently of the distribution of income across agents. This
article uses a 3-period lived overlapping generations economy to examine the
extent to which macro variables such as aggregate consumption are invariant
to government attempts to redistribute income across agents through selective
tax-transfer policies. It shows that conditions for invariance in this
context are much stronger than found for the standard Walrasian general
equilibrium economy.
Time Consistency and Boundedly Rational Optimization
- Leigh Tesfatsion (1986), "Time Inconsistency of Benevolent Government Economies"
(pdf,1.7MB),
Journal of Public Economics, Vol. 31, 1986, 25-52. The published article is available from
Science Direct.
- Abstract: Why do government policymakers in
open-ended dynamic economic models with period-by-period re-optimization tend
to exhibit time inconsistency, in the sense that they systematically deviate
in later periods from earlier planned policy paths? This article develops
necessary and sufficient conditions for time consistency for a general class
of dynamic Walrasian economies that includes many previous economic models
(Brock, Calvo, Kydland-Prescott, Fischer, etc.) as special cases. It is
shown that the time inconsistency of government policymakers can be
explained in this class of models as the consequence of successive structural
changes in the constraints faced by the government policymakers as private
agents carry out decisions in each successive time period conditional on
anticipated future government policy settings.
- Leigh Tesfatsion (1985), "Fair Division with Uncertain Needs and Tastes"
(pdf,738KB),
Social Choice and Welfare, Vol. 2, 1985, 295-309.
The published article is available from
SpringerLink.
- Abstract: This article examines the extent to which
utilitarian social welfare maximization results in an egalitarian outcome for
the classic n-agent cake-cutting problem when the agents are characterized by
heterogeneous subsistence needs as well as by heterogeneous tastes. It is
shown that utilitarian social welfare maximization results in
surplus-egalitarianism---i.e., first meeting needs, then equally dividing the
remaining cake---when tastes are uncertain but needs are known, can be met,
and are required to be met by prior restriction. If the meeting of needs is
not imposed as a lexicographically prior principal of fairness, however,
then---due to the fundamental non-concavity of individual agent utility
functions resulting from the introduction of subsistence needs---utilitarian
social welfare maximization requires that agents with high subsistence needs
be allowed to die with zero shares as a matter of general policy. Moreover,
when needs and tastes are both uncertain, an egalitarian allocation only
results if the meaning of subsistence needs is suitably weakened to a poverty
line definition.
- Leigh Tesfatsion (1981), "Dynamic Investment, Risk Aversion, and Foresight Sensitivity"
(pdf,1.5MB),
Journal of Economic Dynamics and Control, Vol. 3, 1981, 65-96. The
published article is also available from
Science Direct.
- Abstract: Since optimal investment strategies
generally cannot be obtained in closed form when consumers exhibit
non-constant risk aversion, many dynamic investment studies have focused on
the constant risk aversion case. This study considers a general class of
dynamic investment models in which agents are not restricted to have constant
risk aversion. Existence, monotonicity, concavity, differentiability, and
absolute risk aversion properties are established analytically for the
optimal feedback investment strategies and dynamic programming value
functions. A bound is also obtained on the loss in expected utility
resulting from the use of limited foresight horizons. Finally, results are
reported for computer experiments conducted to explore the sensitivity of
expected utility outcomes to changes in the length of the foresight horizon.
For example, the results indicate the optimality of a rolling 2-period
foresight horizon for a particular class of exponential utility functions
exhibiting decreasing risk aversion.
- Leigh Tesfatsion (1980), "Global and Approximate Global Optimality of Myopic Economic Decisions"
(pdf,1.4MB),
Journal of Economic Dynamics and Control, Vol. 2, 1980, 135-160.
The published article is available from
Science Direct.
- Abstract: In actual problem contexts, the time horizon
over which plans are formulated must generally be short in relation to the
history of the process as a whole. What loss of return is entailed by the
use of these relatively short planning horizons? This article develops a
general discrete-time dynamic stochastic control model that encompasses many
well-known economic models. It derives sufficient conditions in this context
for the equivalence of myopic (single period) and global (simultaneous
multiple period) expected return maximization, and it provides a bound for
the loss in global return when these conditions are not met. It also
identifies properties of proxy short-horizon return functions which can be
used to partially order them in terms of overall expected return performance.
- Clifford Hildreth and Leigh Tesfatsion (1977), "A Note on the Dependence Between a Venture and a Current
Prospect"
(pdf,537KB),
Journal of Economic Theory,
Vol. 15, Issue 2, August, 1977, 381-391. The published article is available from
Science Direct.
- Abstract: Some sufficient conditions that a random variable
be positively correlated with every strictly decreasing function of a second
random variable are developed and applied to the problem of choosing the
optimal amount of an uncertain venture. Two of the conditions generalize
conditions previously employed by Samuelson and Scheffman.
- Leigh Tesfatsion (1976), "Stochastic Dominance and the Maximization of Expected Utility",
Review of Economic Studies, Vol. 43, 1976, 301-315. The published article is available from
(JSTOR,pdf,1.2MB).
- Abstract: This article clarifies and extends various
basic relationships between stochastic dominance and the maximization of
expected utility.
- Clifford Hildreth and Leigh Tesfatsion (1974), "A Model of Choice with Uncertain Initial Prospect"
(pdf,953KB),
University of Minnesota, Discussion Paper No. 74-38, 1974.
- Abstract: This paper develops a model of choice with an uncertain initial prospect in place of a fixed initial wealth. Comparative static results are derived and illustrated for a class of economic investment decision problems.
Game Theory
- Daniel Ashlock, Mark D. Smucker, E. Anne Stanley, and Leigh Tesfatsion (1996), "Preferential Partner Selection in an Evolutionary Study of Prisoner's Dilemma"
(pdf,2.6MB),
BioSystems, Vol. 37, Nos. 1-2, 1996, 99-125.
The published article is also available from
Science Direct.
- Abstract: "This study reports on extensive computer experiments for the `Iterated Prisoner's Dilemma with Choice and Refusal of Partners (IPD/CR)' framework introduced in the next article. For example, it is shown that the introduction of choice and refusal tends to enhance the
emergence of cooperation in IPD games in comparison to either random or round-robin partner selection. In addition, with choice and refusal of partners, the fitness values of the players tend to cluster fairly tightly into a small number of narrow regions. Within any one fitness region, however, the players consist of genetically diverse players with interaction
patterns peculiarly adapted to the choice and refusal mechanism. Detailed sensitivity studies are also reported with respect to key parameters such as the learning algorithm `memory weight,' the `minimum tolerance level' below which game offers are refused, and the `refusal payoff' incurred by a player
whenever one of his game offers is refused."
- E. Anne Stanley, Dan Ashlock, and Leigh Tesfatsion (1994), "Iterated Prisoner's Dilemma with Choice and Refusal of Partners"
(pdf,3.5MB),
pp. 131-175, in C. Langton (Ed.), Artificial Life III, Volume XVII, Santa Fe Institute Studies in the Sciences of Complexity, Addison-Wesley, 1994.
- Abstract: This article extends the traditional iterated prisoner's dilemma with round-robin partner matching by permitting players to choose and refuse partners in each iteration on the basis of continually updated expected payoffs. Comparative computer experiments are reported that
indicate the introduction of partner choice and refusal accelerates the emergence of mutual cooperation in the IPD relative to round-robin partner matching. Moreover, in contrast to findings for round-robin partner matching (in which the average payoffs of the players tend to be either clustered
around the mutual cooperation payoff or widely scattered), the average payoff scores of the players with choice and refusal of partners tend to cluster into two or more distinct narrow bands. Preliminary analytical and computational sensitivity studies are also reported for several key parameters.
-
Leigh Tesfatsion (1984), "Games, Goals, and Bounded Rationality"
(pdf,734KB),
Theory and Decision,
Vol. 17, 1984, 149-175. The published article is available from
SpringerLink.
- Abstract: This article presents a generalization of the
standard N-person game with flexible information requirements suitable for
players constrained by certain types of bounded rationality. In particular,
strategies (complete contingency plans) are replaced with partial contingency
plans augmented by goals. Both utility and probability are conditioned on
selected goals and actions (g,a), and both are defined over the same set of
possible (g,a)-conditioned events.
Well-known existence theorems for Nash equilibria and Nash bargaining
solutions are extended to this context.
- Leigh Tesfatsion (1983), "Pure Strategy Nash Equilibrium Points and the Lefschetz Fixed
Point Theorem"
(pdf,501KB),
International Journal of Game Theory, Vol. 12, 1983, 1810-191.
- Abstract: Using the Lefschetz fixed point theorem, a
pure strategy Nash equilibrium existence theorem is established for a class
of n-person games with possibly nonacyclic strategy sets. It is argued that
the Lefschetz approach to fixed point theorems may ultimately prove to be
particularly important in economic and game theory due to the generality of
spaces that can be considered and the interesting related questions that can
be investigated. For example, the Lefschetz approach to fixed point theorems
leads naturally to the concept of a "Nielsen Number" of a function f mapping Y into Y: namely, a
homotopy-invariant lower bound for the number of fixed points of f. The
Nielsen number provides a lower bound for the number of Nash equilibria in
certain n-person games.
- Robert E. Kalaba, Karl Spingarn, and Leigh Tesfatsion (1982),
"A Stability Theorem for Symmetrically Rational Counterplanning", Journal of Optimization Theory and
Applications, Vol. 37, No. 3, July, 1982, 379-385. The published article is available from
SpringerLink.
- Abstract: In the absence of contrary information, it
would seem prudent for a competitor to attribute to his opponents the same
level of rationality that he himself employs. In the context of a general
linear-quadratic nonzero-sum two-person game, it is shown that a
counterplanning procedure consistent with this principle of symmetrical
rationality always converges to the unique Nash equilibrium for the game.
- Leigh Tesfatsion (1980), "C3 Modeling with Symmetrical Rationality"
(pdf,647KB),
Applied
Mathematics and Computation, Vol. 6, 1980, 51-61. The published article is available from
Science Direct.
- Abstract: In the absence of contrary information, it
would seem prudent for competitors to attribute to their opposition the same
level of rationality they attribute to themselves. Using a
simple but interesting C3 (command, control, and communication)
problem for illustration, a method is proposed for incorporating symmetrical
rationality without resorting to the general multistage game framework which
has proved difficult to apply in practice. A "criterion filtering" technique
is then proposed for the approximate
solution of the resulting model which does not require integration operations
and which appears to be especially well suited for C3 problems
with finite admissible control sets.
- Leigh Tesfatsion (1975), "Pure Strategy Nash Bargaining Solutions"
(pdf,501KB),
University of Minnesota, Discussion Paper No. 75-61, November 1975.
- Abstract:
A broad class of 2-person threat games for which a unique pure strategy Nash bargaining solution exists is characterized in terms of three, simple, empirically meaningful restrictions on the joint objective function: compact domain; continuity, and "corner concavity." Connectedness (in particular convexity) of the strategy and payoff sets is not required. In addition, conditions are given for the existence of a pure strategy Nash equilibrium threat solution. Connectedness of the strategy and payoff sets is again not required.
Flexible Least Squares (FLS): A Multicriteria Optimization Method for Model Specification
-
Software Program - FLS (Open Source, Fortran,
Homepage):
Flexible Least Squares
is a multicriteria optimization method for model specification that does not require the imposition of problematic
distribution assumptions on specification errors. The FLS program is an implementation of the FLS method for time-varying linear regression.
-
Software Program - GFLS (Open Source, Fortran,
Homepage):
Generalized Flexible Least
Squares is an implementation of the FLS method for approximately linear systems.
- Robert E. Kalaba and Leigh Tesfatsion (1996), "A Multicriteria Approach to Model Specification and Estimation"
(pdf,1.6MB),
Computational Statistics and Data
Analysis, Vol. 21, 1996, 193-214.
The published article is also available from
Science Direct.
- Abstract: This study considers why multicriteria
techniques have not been widely adopted in econometrics to date. It then
presents a multicriteria approach to estimation problems for which the basic
objective is to learn about the sequence of states through which a process
has passed. The multicriteria approach involves the construction of a "cost
efficient frontier" which determines the set of state trajectory estimates
that are minimally incompatible with a specified set of model criteria. This
approach includes flexible least squares (FLS) and generalized flexible least
squares (GFLS) as special cases; see the articles on FLS and GFLS cited
below. The study also surveys recent theoretical and empirical work that
makes use of FLS and GFLS.
- Robert E. Kalaba and Leigh Tesfatsion (1991), A Unified Approach to Dynamic Estimation"
(pdf,710KB),
Information Sciences, Vol. 57-58, September-December, 1991, 159-169.
The published article is available from
Science Direct.
- Abstract: Discrepancies between assumed dynamical models and
observations are often handled by making further probabilistic assumptions, a
tactic which has both strengths and weaknesses. A re-examination of
filtering and smoothing is conducted, and an alternative multicriteria
approach, which is probability free, is advanced. This approach involves
vector minimization as a key ingredient, and it specializes to the well-known
Kalman, Viterbi, Larson-Peschon, and Swerling filters.
- Robert E. Kalaba and Leigh Tesfatsion (1990), Flexible Least Squares for Approximately Linear Systems
(pdf,1.2MB),
IEEE Transactions on Systems, Man, and Cybernetics, Vol. 20, No. 5, 1990, 978-989.
- Abstract: This article proposes a multicriteria "generalized
flexible least squares (GFLS)" method for the smoothing and filtering of
state-space systems described by approximately linear dynamic and measurement
relations. The basic GFLS objective is to determine the "cost-efficient
frontier," that is, the set of state trajectory estimates that are efficient
in the sense that they are minimally incompatible with the specified dynamic
and measurement relations.
- NOTE: A program implementation for GFLS has been incorporated
into the statistical package GAUSS. For more detailed
information about GFLS software availability, visit the
FLS Home Page
- Leigh Tesfatsion and John M. Veitch (1990), "U.S. Money Demand Instability: A Flexible Least Squares Approach"
(pdf,1.4MB),
Journal of Economic Dynamics and
Control, Vol. 14, No. 1, February, 1990, 151-173. The published article is
available from
Science Direct.
- Abstract: This article uses the flexible least squares
(FLS) method to investigate coefficient stability for the Goldfeld U.S. money
demand model over the volatile period 1959:Q2 to 1985:Q3. The only
constraint imposed on coefficient variation over time is a smoothness prior.
Nevertheless, the time paths traced out by the FLS coefficient estimates
exhibit systematic idiosyncratic time variations as well as simultaneous
shift movements in 1974 during the time of the first oil price shock.
Moreover, the FLS estimates also indicate that the "unit root"
nonstationarity problem reported by OLS money demand studies disappears if
the coefficients are allowed to exhibit even small amounts of time variation.
- Robert E. Kalaba and Leigh Tesfatsion (1990), "An Organizing Principle for Dynamic Estimation",
Journal of Optimization Theory and Applications, Vol. 64, No. 3, March, 1990, 445-470. The published article is available from
SpringerLink.
- Abstract: This paper develops a general multicriteria
framework for the sequential estimation of process states. Three well-known
state estimation algorithms (the Viterbi, Larson-Peschon, and Kalman filters)
are derived as monocriterion specializations. The multicriteria estimation
framework is used to clarify both Bayesian and classical statistical
procedures for treating potential model specification errors. A recently
developed bicriteria specialization (flexible least cost), explicitly
designed to take specification errors into account, is also reviewed. The
latter application suggests how the multicriteria framework might be used to
construct estimation algorithms capable of handling disparate sources of
information coherently and systematically, without forced scalarization.
- Robert E. Kalaba and Leigh Tesfatsion (1989), "Time-Varying Linear Regression Via Flexible Least Squares"
(pdf,2.4MB),
Computers and Mathematics with Applications, Vol. 17, 1989, 1215-1245. The published article is available from
Science Direct.
- Abstract: This article develops a multicriteria
"flexible least squares (FLS)" method for time-varying linear regression.
The basic FLS objective is to determine the "residual efficiency frontier,"
that is, the set of all coefficient trajectory estimates that yield
vector-minimal sums of squared residual measurement and dynamic errors
conditional on a given set of observations.
- NOTE: A program implementation for FLS has been incorporated
into the statistical packages GAUSS and SHAZAM.
For more detailed information about FLS software availability, visit the
FLS Home Page
- Robert E. Kalaba and Leigh Tesfatsion (1989), "Sequential Nonlinear Estimation with Nonaugmented Priors",
Journal of Optimization Theory and Applications, Vol. 60,
No. 3, March, 1989, pp. 421-438. The published article is available from
SpringerLink.
- Abstract: A "flexible least cost method" is proposed
for investigating the basic compatibility of theory and observations in the
absence of valid or known stochastic characterizations for residual error
terms.
- Robert E. Kalaba and Leigh Tesfatsion (1988), "The Flexible Least Squares Approach to Time-Varying Linear Regression"
(pdf,360KB),
Journal of Economic Dynamics and
Control, Vol. 12, No. 1, March, 1988, 43-48. The published article is available from
Science Direct.
- Abstract: This article proposes a "flexible least
squares" (FLS) method for state estimation when the dynamic equations are
unknown but the process state evolves only slowly over time. A smoothness
prior is introduced in place of an explicit specification for the unknown
dynamic equations governing the evolution of the process state. Simulation
experiments illustrating the method are presented.
- Robert E. Kalaba and Leigh Tesfatsion (1988), "Exact Sequential Filtering, Smoothing, and Prediction for Nonlinear
Systems"
(pdf,1.4MB),
Nonlinear Analysis, Vol. 12, Issue 6,
June, 1988, 599-615. The published article is available from
Science Direct.
- Abstract: This article develops two algorithms for
the exact sequential updating of the optimal solution for a general
discrete-time nonlinear least squares estimation problem as the process
length increases and new observations are obtained. One algorithm proceeds
via an imbedding on the process length and the final state vector.
The second algorithm proceeds via an imbedding on the process length and the
final observation vector. Each algorithm generates optimal (least
cost) filtered and smoothed state estimates, together with optimal
one-step-ahead state predictions.
- Robert E. Kalaba, Karl Spingarn, and Leigh Tesfatsion (1981), "A Sequential Method for Nonlinear Filtering: Numerical Implementation
and Comparisons", Journal of
Optimization Theory and Applications, Vol. 34, No. 4, August, 1981, 1144-1149. The published article is available from
SpringerLink.
- Abstract: Exact equations are presented for
sequentially updating the optimal solution for a discrete-time analog of the
basic Sridhar nonlinear filtering problem as the process length increases and
new observations are obtained. A tabular method is described for
implementing numerically the sequential filtering equations. The accuracy
and efficiency of the tabular method are illustrated by means of several
numerical examples.
- Robert E. Kalaba and Leigh Tesfatsion (1981), "An Exact Sequential solution Procedure for a Class of Discrete-Time
Nonlinear Estimation Problems"
(pdf,595KB),
IEEE Transactions on
Automatic control, Vol. 26, 1981, 1144-1149. The published article is available at
IEEE Xplore.
- Abstract: This article develops an exact procedure for
sequentially updating the optimal solution for a general discrete-time
nonlinear least squares estimation problem as the process length increases
and new observations are obtained.
- Robert E. Kalaba and Leigh Tesfatsion (1980), "A Least-Squares Model Specification Test for a Class of Dynamic
Nonlinear Economic Models with Systematically Varying Parameters",
Journal of Optimization Theory and Applications, Vol. 32,
No. 4, December, 1980, 537-567. The published article is available from
SpringerLink.
- Abstract: This study develops a least-squares measure
for simultaneously testing the basic compatibility of prior dynamical,
observational, and distributional model specifications against actual data
for a class of dynamic nonlinear economic models with parameters explicitly
modeled as nonlinear functions of endogenous and exogenous variables. Using
invariant imbedding techniques, an algorithm is derived for sequentially
updating the optimal least-squares estimates for parameters, endogenous
variables, and squared residual modeling error sums as the duration of the
process increases and new observations are obtained.
Nonlinear Estimation via Associative Memories
-
Software Program - MAM (Open Source, Fortran,
Homepage):
The Multicriteria Associative Memory solver
is a nonlinear estimation method based on a multicriteria associative memory process.
- Robert E. Kalaba, Z. Lichtenstein, T. Simchony, and Leigh Tesfatsion (1992), "Linear and Nonlinear Associative Memories for Parameter
Estimation"
(pdf,1.3MB),
Information Sciences, Vol. 61, Issue 102, April, 1992, 45-66. The published article is available from
Science Direct.
- Abstract:This article discusses the use of associative memories for obtaining preliminary parameter estimates for nonlinear systems.
- Robert E. Kalaba and Leigh Tesfatsion (1991), "Obtaining Initial Parameter Estimates for Nonlinear
Systems Using Multicriteria Associative Memories"
(pdf,1.3MB),
Computer Science in Economics and Management (now
Computational Economics), Vol. 4, 1991, 237-259.
- Abstract: Parameter estimation problems for nonlinear systems
are typically formulated as nonlinear optimization problems. For such problems, one has the
usual difficulty that standard successive approximation schemes require good initial estimates
for the parameter vector. This article develops a simple multicriteria
associative memory (MAM) method for obtaining good initial estimates for
nonlinear parameter estimation problems. The method is implemented by the Fortran program
MAM
Solution Tracking for General Parameterized Nonlinear systems
-
Software Program - NASA (Open Source, Fortran,
Homepage):
The Nonlocal Automated Sensitivity Analysis solver permits the automated tracking of solutions
for parameterized nonlinear systems along user-specified parameter paths.
- Leigh Tesfatsion (2001), "Nonlocal Sensitivity Analysis with Automatic Differentiation"
(pdf,114KB),
C. A. Floudas and P. M. Pardalos (Eds.), Encyclopedia of Optimization,
Second Edition, Springer, 2001, pp. 2642-2647.
- Abstract: This encyclopedia entry is a summary report
on the design and use of the
NASA program
for the Nonlocal Automated Sensitivity Analysis
of parameterized nonlinear systems H(x,b)=0.
- Leigh Tesfatsion (1992), "Nonlocal Automated Comparative Static Analysis", Computer Science in Economics and Management (now Computational
Economics), Vol. 5, No. 4, November, 1992, 313-331. The published article is
available from
SpringerLink.
- Abstract: This paper reviews work on the development of the
NASA program
for the automated comparative static analysis of parameterized nonlinear systems over
parameter intervals. NASA
incorporates a fast and efficient algorithm Feed for the automatic
evaluation of higher-order partial derivatives, as well as an adaptive
homotopy continuation algorithm for obtaining all required initial
conditions. Applications are envisioned for fields such as economics where
models tend to be complex and closed-form solutions are difficult to obtain.
- Robert E. Kalaba and Leigh Tesfatsion (1990), "Nonlocal Automated Sensitivity Analysis"
(pdf,1MB),
Computers and Mathematics with Applications, Vol. 20, Issue 2, 1990, 53-65. The published article is available from
Science Direct.
- Abstract: This article presents and illustrates the
applicability of the
NASA program
for the Nonlocal Automated Sensitivity Analysis
of parameterized nonlinear systems H(x,b)=0. The NASA program incorporates
automated procedures for initialization, derivative evaluation, and the
tracking of solution branches x(b) along user-designated paths for
the parameter vector b.
- Robert E. Kalaba and Leigh Tesfatsion (1986), "Nonlocal Sensitivity Analysis, Automatic Derivative Evaluation, and
Sequential Nonlinear Estimation"
(pdf,1.4MB),
Computational Statistics and Data Analysis, Vol. 4, No. 2, July, 1986, 79-81. The published article is available from
Science Direct.
- Abstract: This article summarizes work by the authors on
computational methods for nonlinear systems. Section 2 develops a complete
set of ordinary differential equations for generating solutions to
parameterized systems of nonlinear equations over parameter intervals of
interest. Section 3 presents a simple finite algorithm, FEED, for the
exact forward-mode automatic evaluation of higher-order partial derivatives
using derivative arrays. Section 4 obtains an exact sequential
characterization of the solution to a general nonlinear least-squares
estimation problem as the duration of the process increases and additional
observations are made.
- Robert E. Kalaba, Leigh Tesfatsion, and Jone-Lin Wang (1981), "Local and Nonlocal Comparative Static Analysis of Economic
Systems"
(pdf,382KB),
Applied Mathematics and Computation, Vol. 9, 1981, 227-234. The published article is available from
Science Direct.
- Abstract: The complete system of ordinary differential
equations developed by Kalaba and Tesfatsion (1981) for tracking
solution branches of parameterized nonlinear systems (see the next article)
is tested using several illustrative examples. One example is the standard
Ramsey optimal growth model, for which analytical solutions can be obtained.
For this example, the complete system is used to generate solutions c(rho)
and k(rho) for the steady-state per-capita levels for consumption and capital
as the time preference parameter rho varies from 0 to 0.50. Accuracy to four
decimal places is obtained. This represents a stringent test of the method,
since the derivative of k(rho) near rho=0 is on the order of -102
whereas the derivative of k(rho) near rho=0.50 is on the order of
-100.
- Robert E. Kalaba and Leigh Tesfatsion (1981), "Complete Comparative Static Differential Equations"
(pdf,753KB),
Nonlinear Analysis: Theory, Methods, and Applications, Vol. 5, No. 8, August, 1981, 821-833. The published article is available from
Science Direct.
- Abstract: This article develops a complete system of
ordinary differential equations for tracking solution branches x(b) of a
parameterized system of nonlinear equations H(x,b) = 0 along arbitrary
user-designated paths for the parameter vector b. The complete system is
obtained by augmenting the usual fundamental equation of comparative static
analysis,
dx(b)/db = -Hx(x(b),b)-1Hb(x(b),b),
with ordinary differential equations for the Jacobian inverse. The
feasibility and accuracy of the method are illustrated by several
numerical examples.
- Note: This complete differential system constitutes the core
of the
NASA Program
for the Nonlocal Automated Sensitivity Analysis
of parameterized nonlinear systems H(x,b)=0.
- Leigh Tesfatsion (1978), "Parameter-Sensitivity Study for a Linear-Quadratic Control Problem
with Random State Coefficients"
(pdf,1.1MB),
Information Sciences, Vol. 15, No. 2, July, 1978, 101-125. The published article is available from
Science Direct.
- Abstract: This study undertakes a detailed parameter
sensitivity study for the optimal feedback-control law and dynamic
programming optimality equations associated with a discrete-time
finite-horizon linear-quadratic control problem with random state
coefficients. Both analytical and computational findings are reported. One
interesting characteristic revealed by the analysis is the existence of
simple linear relationships between parameter sensitivities for the optimal
feedback-control selections and for the corresponding dynamic programming
value ("cost-to-go") functions.
Tracking of Eigenvalues and Eigenvectors for General Parameterized Matrices
NOTE: All of the eigenvalue/eigenvector tracking algorithms below can be implemented via the
NASA Program
for the Nonlocal Automated Sensitivity Analysis
of parameterized nonlinear systems H(x,b)=0.
- Robert E. Kalaba, Karl Spingarn, and Leigh Tesfatsion (1981), "Variational Equations for the Eigenvalues and Eigenvectors of
Nonsymmetric Matrices"
(pdf,359KB),
Journal of Optimization Theory and Applications, Vol. 33, 1981, 1-8. The published article is available from
SpringerLink.
- Abstract: This article develops a complete system of
ordinary differential equations for tracking the eigenvalues and the
right and left eigenvectors of nonsymmetric parameterized matrices over parameter
intervals. A simpler reduced form of the ODE system is then derived
for tracking the eigenvalues and eigenvectors of symmetric parameterized matrices.
The feasibility and accuracy of the tracking method are illustrated by
numerical examples.
- Robert E. Kalaba, Karl Spingarn, and Leigh Tesfatsion (1981), "Individual Tracking of an Eigenvalue and Eigenvector of a
Parameterized Matrix"
(pdf,207KB),
Nonlinear Analysis: Theory, Methods, and Applications, Vol. 5, No. 4, 1981, 337-340. The published article is available from
Science Direct.
- Abstract: This article develops a complete system of
ordinary differential equations for tracking a single eigenvalue of a
parameterized matrix, together with one of its corresponding right or left
eigenvectors, over parameter intervals. The feasibility and accuracy of the
method are illustrated by numerical examples.
- Robert E. Kalaba, Karl Spingarn, and Leigh Tesfatsion (1980), "A New Differential Equation Method for Finding the Perron Root of a
Positive Matrix"
(pdf,409KB),
Applied Mathematics and Computation, Vol. 7, No. 3, October, 1980, 187-193. The published article is available from
Science Direct.
- Abstract: This article develops a complete system of
ordinary differential equations for tracking the Frobenius-Perron root
(largest eigenvalue) of a parameterized matrix, together with a
unit-normalized right eigenvector, over parameter intervals. The feasibility
and accuracy of the method are illustrated by numerical example.
Adaptive Homotopy Continuation
- Robert E. Kalaba and Leigh Tesfatsion (1991), "Solving Nonlinear Equations By Adaptive Homotopy Continuation"
(pdf,1MB),
Applied Mathematics and Computation, Vol. 41, No. 2, Part II, January, 1991, 99-115. The published article is available from
Science Direct.
- Abstract: This article introduces and constructively
illustrates the concept of an adaptive homotopy for solving systems of
nonlinear equations. Standard homotopy methods rely on a passive
continuation parameter moving from 0 to 1 along the real line and are stymied
if the homotopy Jacobian matrix becomes ill-conditioned along this path. In
contrast, an adaptive homotopy replaces the passive continuation parameter by
a "smart agent" that adaptively makes its way by trial and error from 0+0i to
1+0i in the complex plane in accordance with certain specified objectives.
The homotopy thus adapts to the physical problem at hand rather than
requiring the user to reformulate his physical problem to conform to homotopy
requirements. The adaptive homotopy algorithm designed and tested in the
current study incorporates two objectives: (a) short continuation path; and
(b) avoidance of regions where the homotopy Jacobian matrix becomes
ill-conditioned.
- Note: This adaptive homotopy method has been incorporated into the
NASA Program
for the Nonlocal Automated Sensitivity Analysis
of parameterized nonlinear systems H(x,b)=0 in order to generate all needed initial conditions automatically.
Automatic Evaluation of Higher-Order Partial Derivatives
- Leigh Tesfatsion (1991), "Automatic Evaluation of Higher-Order Partial Derivatives for Nonlocal
Sensitivity Analysis", pp. 157-165 in A. Griewank and G. Corliss (Eds.),
Automatic Differentiation of Algorithms: Theory, Implementation, and
Application, SIAM, Philadelphia, 1991.
- Abstract: This proceedings paper surveys work
on the FEED (Fast Efficient Evaluation of Derivatives) algorithm originally
developed by Kalaba, Tesfatsion, and Wang (1983), with particular reference
to the use of FEED for the implementation of nonlocal automated sensitivity
techniques; see the articles below. The relationship of FEED to the automatic
differentiation algorithms developed by other SIAM Workshop participants is
clarified.
- Robert E. Kalaba, Thomas Plum, and Leigh Tesfatsion (1987), "Automation of Nested Matrix and Derivative Operations"
(pdf,863KB),
Applied Mathematics and Computation, Vol. 23, No. 3, September, 1987, 243-268.
The published article is available from
Science Direct.
- Abstract: In Kalaba, Tesfatsion, and Wang (1983) - see
below -- an algorithm was developed for the exact forward-mode automatic
evaluation of higher-order partial derivatives of functions of many variables
using derivative arrays. This algorithm was supported by a library of
"calculus subroutines" for many standard one-variable and two-variable
functions. This article extends the FEED library to permit the automatic
differentiation of expressions involving nested matrix and derivative
operations. The need to differentiate such expressions arose naturally in
the course of designing sequential filters for a class of nonlinear tracking
problems.
- Robert E. Kalaba and Leigh Tesfatsion (1986), "Automatic Differentiation of Functions of Derivatives"
(pdf,671KB),
Computers and Mathematics with Applications, Vol. 12, Issue 11, Part 1, November, 1986, 1091-1103. The published article is
available from
Science Direct.
- Abstract: In Kalaba, Tesfatsion, and Wang (1983) -- see below -- the FEED algorithm was introduced for the exact forward-mode
automatic evaluation of higher-order partial derivatives of functions of many
variables using derivative arrays. This study demonstrates that FEED can be
applied to a much broader class of functions than originally envisioned:
namely, functions defined in terms of the derivatives of other functions.
Such functions arise in many applications.
- Robert E. Kalaba, Leigh Tesfatsion, and Jone-Lin Wang (1983), "A Finite Algorithm for the Exact Evaluation of Higher Order Partial
Derivatives of Functions of Many Variables"
(pdf,514KB),
Journal of Mathematical Analysis and Applications, Vol. 92, 1983, 552-563. The published article is available from
Science Direct.
- Abstract: This article develops an algorithm for the
exact forward-mode automatic evaluation of higher order partial derivatives
using derivative arrays, now referred to as the FEED (Fast Efficient
Evaluation of Derivatives) algorithm. Building on previous work by R.
Wengert, the FEED algorithm proceeds by decomposing the evaluation of
complicated functions of many variables into a sequence of simpler
evaluations of special functions of one or two variables.
- Note: A library of FEED calculus subroutines has been
incorporated into the
NASA program
for the Nonlocal Automated Sensitivity Analysis
of parameterized nonlinear systems H(x,b)=0 in order to generate all needed derivative
evaluations automatically.