Abstract: The excess or shortage of generation power capacity investment will lead to huge economic and social losses.In the paper,on the basis of bidding equilibrium of power producers,the model for investment threshold and capacity choice under uncertain power demand is presented,with real option and game theory.Then,the optimal investment threshold and capacity of investors are displayed by numerical simulation.The results indicate that,1) the investment threshold and optimal capacity are decreasing with the amount of investors,but increasing with the uncertainty of power demand; 2) to the whole power market,when the amount of power investors is smaller,the market efficiency is lower,but power supply is more adequate.

Key words: real option, game theory, investment threshold, capacity choice, power market