Dynamic pricing efficiency with strategic retailers and consumers: An analytical analysis of short-term market interactions

Demand response programmes reduce peak-load consumption and could increase off-peak demand as a load-shifting effect often exists. In this research we use three-stage game to assess the effectiveness of dynamic pricing regarding its economic consequences. We consider retailer's strategic supplies on forward or real time markets, when is uncertain with consumer disutility incurred from load-shedding load-shifting. Our main results show that retailer internalize part uncertainty by using both markets. A raises quantities committed market if energy prices balancing costs are high. If suffers disutility, then contracts larger volumes for peak periods less off peak, due lower prices.