Computing Cournot equilibria in two settlement electricity markets with transmission constraint

We formulate a two-settlement equilibrium in competitive electricity markets as a subgame-perfect Nash equilibrium in which each generation firm solves a Mathematical Program with Equilibrium Constraints (MPEC), given other firms' forward and spot strategies. We implement two computational approaches, one of which is based on a penalty interior point algorithm and the other is based on a steepest descent approach. We apply the algorithm to a six node illustrative example.