Modeling Demand Response in Electricity Retail Markets as a Stackelberg Game

Publication: Research - peer-reviewPaper – Annual report year: 2012


View graph of relations

We model the retail market with dynamic pricing as a Stackelberg game where both retailers (leaders) and flexible consumers (followers) solve an economic cost-minimization problem. The electricity retailer optimizes an economic objective over a daily horizon by setting an hourly price-sequence, which is then communicated to the end-consumers. In turn, on the basis of such price sequence, consumers optimize a utility function that accounts both for energy procurement costs and for the benefit loss resulting from deferring consumption. The game is formulated as a Mathematical Problem with Equilibrium Constraints (MPEC) and cast as a Mixed Integer Linear Program (MILP), which can be solved using off-the-shelf optimization software. In an illustrative example, we consider a retailer associated with both flexible demand and wind power production. Such an example shows the efficiency of dynamic pricing as a way to control the load for minimizing the imbalances due to wind power, assesses the overall economic results for the retailer and the consumers as well as the dynamic properties of consumer flexibility.
Original languageEnglish
Publication date2012
Number of pages11
StatePublished - 2012
Event12th IAEE European Energy Conference: Energy challenge and environmental sustainability - Venice, Italy


Conference12th IAEE European Energy Conference: Energy challenge and environmental sustainability
LocationCa' Foscari University of Venice
Internet address


  • Demand response, Bilevel programming, Stackelberg games, Wind power, Electricity markets
Download as:
Download as PDF
Select render style:
Download as HTML
Select render style:
Download as Word
Select render style:

Download statistics

No data available

ID: 51142586