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Promoting dynamic pricing implementation considering policy incentives and electricity retailers’ behaviors: An evolutionary game model based on prospect theory

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  • Dong, Jun
  • Jiang, Yuzheng
  • Liu, Dongran
  • Dou, Xihao
  • Liu, Yao
  • Peng, Shicheng

Abstract

As one method of demand-side management, dynamic pricing benefits society by promoting power supply and demand balance, renewable energy consumption, and market efficiency improvement. However, due to the novelty of dynamic pricing, it has not been well promoted among consumers in China. The regulators, electricity retailers and consumers all have a critical role to play in promoting dynamic pricing, and they have both common interests and mutual constraints. Coordinating the interests of the three parties will facilitate the promotion of dynamic pricing. This study establishes an evolutionary game model for these three parties from a bounded rationality perspective and investigates each party's dynamic evolution strategy. The findings indicate that the subsidy from the regulator, the cost of promoting dynamic pricing, the electricity price level, the consumer's responsiveness, and psychological factors all influence the promotion of dynamic pricing. The findings suggest policy recommendations for accelerating the development of dynamic pricing and a healthy electricity retail market.

Suggested Citation

  • Dong, Jun & Jiang, Yuzheng & Liu, Dongran & Dou, Xihao & Liu, Yao & Peng, Shicheng, 2022. "Promoting dynamic pricing implementation considering policy incentives and electricity retailers’ behaviors: An evolutionary game model based on prospect theory," Energy Policy, Elsevier, vol. 167(C).
    • Handle: RePEc:eee:enepol:v:167:y:2022:i:c:s0301421522002841
    DOI: 10.1016/j.enpol.2022.113059
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