Playing Stackelberg games for minimal cost for production and utilities

Abstract

A method is presented for the minimization of total production cost, which consist of cost for production and energy. Commonly, cost is minimized separately for production and utility systems without any feedback. This separated planning can increase total production cost. Conceptually, a joint optimization of production and utility system is desirable, but often not feasible in practice, e.g., if different companies run the production and utility system. In this paper, we address this practical limitation by proposing a repeated Stackelberg game. In the method, the production schedule is determined such that cost for both production and utility system are reduced. For this purpose, price information are passed from the utility system to the production system leading to fast convergence of the repeated Stackelberg game. The effectiveness of the proposed repeated Stackelberg game is shown for a literature-based case study. The proposed method reduces the total production cost by 13.6 % in only one repetition. The suggested method provides an effective approach to operate systems with minimal total cost in practice. © 2018 University of Minho. All rights reserved.