A Pricing Method for Demand Response Using Game Theory

Demand response plays an important role in promoting the liberalization of the power industry and improving the efficient operation of the power system. Therefore, it is of great significance to design an appropriate pricing method for the implementation of demand response. The interaction between retailers and consumers can be modeled by game theory because each attempt to maximize their own benefits. In this study, we formulate the demand response problem in the smart grid as a bi-level game: a Stackelberg game between retailers and consumers and a noncooperative game among consumers. Three dynamic pricing are compared through the four evaluation indexes. Numerical results are provided to illustrate the effectiveness of the proposed pricing method.