Game Analysis of Electricity Retail Market Considering Customers’ Switching Behaviors and Retailers’ Contract Trading

Abstract

Deregulation of electricity retail market enables competition among retailers and thereby enriches customers’ choices. In this environment, retailers compete in the retail market mainly by bidding their retail prices. As bidding price of a retailer increases, customers would reduce their demands on this retailer, or even switch their demands to other retailers with lower bidding prices. These potential consequences will inevitably impact retailers’ bidding strategies in the retail market. The impacts of consumers’ switching behaviors and contract trading on strategic behaviors of retailers in the retail market is first investigated in this paper. A Bertrand-based game model for the retail market is proposed while considering customers’ switching behaviors and retailers’ contract trading. Specifically, in the proposed model, the market share function is introduced to describe customers’ elasticity and switching behaviors. Also, the close-loop interaction of the wholesale market and retail market is considered. In addition, the existence and uniqueness of the Nash equilibrium for the game model are proved. The nonlinear complementarity approach is employed to find the Nash equilibrium outcomes. Effectiveness of the theoretical model is verified by numerical examples. Simulation results show that both customers’ switching behaviors and retailers’ contract trading can help mitigate market power abuse of retailers.