We introduce a theoretical framework for the analysis of competition between a traditional and a renewable generator in a spot electricity market where the electricity from renewable sources is always the first to be dispatched.
Under non-exponential discounting, we develop a dynamic theory for stopping problems in continuous time. Our framework covers discount functions that induce decreasing impatience. Due to the inherent time inconsistency, we look for equilibrium stopping policies, formulated as fixed points of an operator. Under appropriate conditions, fixed-point iterations converge to equilibrium stopping policies.
