Title: Reactive Power Compensation Game under Prospect-Theoretic Framing Effects,
Abstract: Reactive power compensation is an important challenge in current and future
smart power systems. However, in the context of reactive power compensation,
most existing studies assume that customers can assess their compensation
value, i.e., Var unit, objectively. In this paper, customers are assumed to
make decisions that pertain to reactive power coordination. In consequence, the
way in which those customers evaluate the compensation value resulting from
their individual decisions will impact the overall grid performance. In
particular, a behavioral framework, based on the framing effect of prospect
theory (PT), is developed to study the effect of both objective value and
subjective evaluation in a reactive power compensation game. For example, such
effect allows customers to optimize a subjective value of their utility which
essentially frames the objective utility with respect to a reference point.
This game enables customers to coordinate the use of their electrical devices
to compensate reactive power. For the proposed game, both the objective case
using expected utility theory (EUT) and the PT consideration are solved via a
learning algorithm that converges to a mixed-strategy Nash equilibrium. In
addition, several key properties of this game are derived analytically.
Simulation results show that, under PT, customers are likely to make decisions
that differ from those predicted by classical models. For instance, using an
illustrative two-customer case, we show that a PT customer will increase the
conservative strategy (achieving a high power factor) by 29% compared to a
conventional customer. Similar insights are also observed for a case with three
customers.