Pricing mechanisms for cooperative state estimation

The conflict between cooperation in distributed state estimation and the resulting leakage of private state information (competitive privacy) is studied for an interconnected two regional transmission organizations (RTOs) model of the grid. Using an information theoretic rate-distortion-leakage (RDL) tradeoff model, each RTO communicates at a rate chosen to optimize an objective function that is dependent on two opposing quantities: a rate-distortion based pricing function that encourages cooperation, and a leakage function that impedes it. It is shown that strictly non-zero pricing incentives are required to achieve non-trivial target distortions.