  Due to its theoretical virtues, several recent works propose the use of the
incentive-compatible Vickrey-Clarke-Groves (VCG) mechanism for electricity
markets. Coalitions of participants, however, can influence the VCG outcome to
obtain higher collective profit. To address this issue, we propose
core-selecting mechanisms for their coalition-proofness. We show that
core-selecting mechanisms generalize the economic rationale of the locational
marginal pricing (LMP) mechanism. Namely, these mechanisms are the exact class
of mechanisms that ensure the existence of a competitive equilibrium in
linear/nonlinear prices. This implies that the LMP mechanism is also
core-selecting, and hence coalition-proof. In contrast to the LMP mechanism,
core-selecting mechanisms exist for a broad class of electricity markets, such
as ones involving nonconvex costs and nonconvex constraint sets. In addition,
they can approximate truthfulness without the price-taking assumption of the
LMP mechanism. Finally, we show that they are also budget-balanced. Our results
are verified with case studies based on optimal power flow test systems and the
Swiss reserve market.
