Pricing Strategies in Grid Market: Simulation and Analysis

The most important concept of a market is price - the terms on which the trading objects (products or services) are exchanged. In an ideal market, the price is a reflection of the current state of the market, and therefore it should be dynamic. From the seller perspective, using an effective dynamic pricing strategy can make a difference between making a profit or loss in a market. In a grid marketplace, the strategy is even more important given it is very dynamic and volatile nature. In this paper, we describe and review three different pricing strategies for the grid market: demand-response, revenue-response and price-maximizing strategy, and analyze their behavior in different market conditions using simulation approach. Our results show that two of the strategies are able to generate high revenue in various market conditions.