A decentralized incentive mechanism for company-wide energy consumption reduction

This thesis proposes a decentralized reward-based incentive mechanism to address the problem of noncomplying subsidiaries when the parent company wish to meet its targeted energy consumption level. Besides its effectiveness in ensuring compliance, the proposed mechanism is advantageous as it is able to induce the optimal subsidiary behavior that maximizes the company profit given a carefully chosen reward allocation scheme. In addition, when the company is willing to trade part of its profit for an operationally simple mechanism, simple uniform allocation scheme is highly effective when the subsidiaries exhibit certain degree of symmetry. The results above are drawn from our investigation on a more general model: Cournot competition under a joint constraint. For this model, we study the equilibrium behavior under free competition and compare the profit and total surplus achieved with the corresponding values when different levels of coordination are introduced in the market (i.e., the Monopoly market and the society-wide coordinated market). We establish tight upper bounds for the profit and total surplus loss due to lack of coordination as functions of various market characteristics (i.e., number of firms, intensity of competition and asymmetry between firms).

Department dc:contributor.department

Massachusetts Institute of Technology. Computation for Design and Optimization Program.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2010

Author dc:creator

• Wang, Jingxi, S.M. Massachusetts Institute of Technology

Advisor dc:contributor.advisor

• Georgia Perakis.

• Computation for Design and Optimization Program.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/61897

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/61897