In power markets,a significant research area is how a market participant should bid strategically to obtain the maximum gain of itself without sacrificing constraints of the m arket and system operation constraints,and how the m arket administrator should estim ate and judge the unfair competitions.This issue requires applications of gam e theory.In this paper game theory and its applications in power m arkets are introduced. The paper is composed of two parts. The first part is to introduce the history and classification of gam e theory and its applications in various areas. Simple examples are presented to show how to build up a proper m ath m odel for a specific gaming problem and how to find its solution.The important concept of Nash equilibria and the difficulties in finding a feasible Nash equilibrium are also emphasized.The second part focuses on the applications of game theory in power markets,which include the bidding strategies of the generation com panies,the pricing of transm ission and wheeling and the rational allocation of the transmission cost,and the estimation and judgement of the unfair market power which may appear in the power market. This project is supported by National Key Basic Research Special Fund of China No. G19980 2 0 30 5 ,the Research Grant Council RGC ,Hong Kong SAR Government,and the Com mittee of Research and Conference Grant CRCG ,the U niversity of Hong Kong.
