Rational consumer behavior models in smart pricing

Abstract

A game-theoretic framework based on smart pricing in power grids that incorporates heterogeneous user preferences and renewable power uncertainty is considered. The system operator adopts an adaptive pricing policy that depends on total consumption and renewable generation. The pricing policy sets up a non-cooperative game of incomplete information among users with heterogeneous preferences. Selfish, altruistic and welfare maximizing user behavior models are proposed. Information exchange models in which users only have private information, communicate or receive broadcasted information are considered. For each pair of behavior and information exchange models, rational consumption strategy is characterized. Numerical analyses reveal that communication is beneficial for the expected aggregate payoff while it does not affect the expected net revenue of the system operator. Moreover, the additional information to the users helps reduce the variance of total consumption among runs increasing the accuracy of demand predictions.