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Price competition among incumbent and new entrants of retail electricity providers considering the impact of social networks

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  • Li, He
  • Fang, Debin
  • Wu, Jiaxin

Abstract

The liberalization of the retail electricity market exposes the incumbent to competition from new entrants of retail electricity providers (REPs). This paper studies how different REPs develop pricing strategies in social networks under complete and incomplete information. First, we define differentiated user utility functions based on the characteristics of loyal users (LUs) and active users (AUs) and build a pricing optimization model for REPs. Second, a two-layer network involving a multi-agent game is constructed. The first layer represents the social relationship among users, and the second layer represents the electricity transaction relationship between REPs and users. Simulation results indicate that under complete information, the incumbent can still attract a portion of AUs despite higher prices, whereas under incomplete information, new entrants can leverage network effects to transmit low-price signals, thereby attracting AUs. Moreover, when a user maintains more direct links with others and the intensity of network externalities is sufficiently large, users tend to choose REPs with higher prices but larger market shares due to the influence of network externalities. This study provides theoretical support for the pricing strategies of different types of REPs.

Suggested Citation

  • Li, He & Fang, Debin & Wu, Jiaxin, 2025. "Price competition among incumbent and new entrants of retail electricity providers considering the impact of social networks," Energy, Elsevier, vol. 335(C).
    • Handle: RePEc:eee:energy:v:335:y:2025:i:c:s0360544225037028
    DOI: 10.1016/j.energy.2025.138060
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