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

TL;DR

This paper models a multi-period demand response management problem in smart grids using a Stackelberg game, analyzing utility company strategies and user participation incentives with unique equilibrium solutions.

Contribution

It introduces a novel multi-period game-theoretic model for demand response, deriving closed-form strategies and conditions for user participation in smart grids.

Findings

Unique Stackelberg equilibrium identified

Multi-period scheme incentivizes greater user participation

Closed-form expressions for strategies provided

Abstract

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.