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Effects of herding behavior of tradable green certificate market players on market efficiency: insights from heterogeneous agent model

Effects of herding behavior of tradable green certificate market players on market efficiency:... Abstract Tradable green certificate (TGC) scheme promotes the development of renewable energy industry which currently has a dual effect on economy and environment. TGC market efficiency is reflected in stimulating renewable energy investment, but may be reduced by the herding behavior of market players. This paper proposes and simulates an artificial TGC market model which contains heterogeneous agents, communication structure, and regulatory rules to explore the characteristics of herding behavior and its effects on market efficiency. The results show that the evolution of herding behavior reduces information asymmetry and improves market efficiency, especially when the borrowing is allowed. In addition, the fundamental strategy is diffused by herding evolution, but TGC market efficiency may be remarkably reduced by herding with borrowing mechanism. Moreover, the herding behavior may evolve to an equilibrium where the revenue of market players is comparable, thus the fairness in TGC market is improved. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Frontiers in Energy Springer Journals

Effects of herding behavior of tradable green certificate market players on market efficiency: insights from heterogeneous agent model

Zuo, Yi; Zhao, Xingang
Frontiers in Energy , Volume OnlineFirst: 20 – Jul 10, 2021
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Publisher
Springer Journals
Copyright
2021 Higher Education Press
ISSN
2095-1701
eISSN
2095-1698
DOI
10.1007/s11708-021-0752-1
Publisher site
See Article on Publisher Site

Abstract

Abstract Tradable green certificate (TGC) scheme promotes the development of renewable energy industry which currently has a dual effect on economy and environment. TGC market efficiency is reflected in stimulating renewable energy investment, but may be reduced by the herding behavior of market players. This paper proposes and simulates an artificial TGC market model which contains heterogeneous agents, communication structure, and regulatory rules to explore the characteristics of herding behavior and its effects on market efficiency. The results show that the evolution of herding behavior reduces information asymmetry and improves market efficiency, especially when the borrowing is allowed. In addition, the fundamental strategy is diffused by herding evolution, but TGC market efficiency may be remarkably reduced by herding with borrowing mechanism. Moreover, the herding behavior may evolve to an equilibrium where the revenue of market players is comparable, thus the fairness in TGC market is improved.

Journal

Frontiers in Energy – Springer Journals

Published: Jul 10, 2021

Keywords: energy systems; energy, general

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