A Stackelberg Game for Multi-Period Demand Response Management in the Smart Grid

This paper studies a multi-period demand response management problem in the smart grid where multiple utility companies compete among themselves. The user-utility interactions are modeled by a noncooperative game of a Stackelberg type where the interactions among the utility companies are captured through a Nash equilibrium. It is shown that this game has a unique Stackelberg equilibrium at which the utility companies set prices to maximize their revenues (within a Nash game) while the users respond accordingly to maximize their utilities subject to their budget constraints. Closed-form expressions are provided for the corresponding strategies of the users and the utility companies. It is shown that the multi- period scheme, compared with the single-period case, provides more incentives for the users to participate in the game. A necessary and sufficient condition on the minimum budget needed for a user to participate is provided.Comment: Accepted for Proc. 54th IEEE Conference on Decision and Contro

Load Shifting in the Smart Grid: To Participate or Not?

Demand-side management (DSM) has emerged as an important smart grid feature that allows utility companies to maintain desirable grid loads. However, the success of DSM is contingent on active customer participation. Indeed, most existing DSM studies are based on game-theoretic models that assume customers will act rationally and will voluntarily participate in DSM. In contrast, in this paper, the impact of customers' subjective behavior on each other's DSM decisions is explicitly accounted for. In particular, a noncooperative game is formulated between grid customers in which each customer can decide on whether to participate in DSM or not. In this game, customers seek to minimize a cost function that reflects their total payment for electricity. Unlike classical game-theoretic DSM studies which assume that customers are rational in their decision-making, a novel approach is proposed, based on the framework of prospect theory (PT), to explicitly incorporate the impact of customer behavior on DSM decisions. To solve the proposed game under both conventional game theory and PT, a new algorithm based on fictitious player is proposed using which the game will reach an epsilon-mixed Nash equilibrium. Simulation results assess the impact of customer behavior on demand-side management. In particular, the overall participation level and grid load can depend significantly on the rationality level of the players and their risk aversion tendency.Comment: 9 pages, 7 figures, journal, accepte