Vulnerability of Demand Response Programs under Price Anticipating and Cooperative Agent Behaviour

Demand Response (DR) is instrumental in shifting the peak demand and effectively handling the variability of deep renewable energy penetration in the power grid. Price-based demand response programs have been proposed by researchers as an important tool. In this work, we first discuss that strategic price-anticipating human behavior can adversely affect the efficiency of price-based demand response. Next, we show that if the strategic price anticipating agents cooperate with others, the social welfare can reduce further. The situation is modeled using coalitional game. Under some conditions on utility functions, the modeled cooperative game can be superadditive and the payoff allocation is in the core. Thus, strategic agents can make stable and profitable coalitions resulting more damage to efficiency. So, while designing price signal, the impact of agent behavior needs to be analyzed carefully for achieving efficient performance.