Cooperative demand response using repeated game for price-anticipating buildings in smart grid

This paper proposes a cooperative demand response scheme for price-anticipating buildings in smart grid. The cooperative demand response scheme is formulated as a constrained social optimization problem. We develop a cooperative strategy and obtain a Pareto-optimal solution from the constrained social optimization problem. Comparing with the Nash equilibrium obtained from the one-stage demand management game, the Pareto-optimal solution reduces the electricity costs to all the building managers. We further align this Pareto-optimal solution with the subgame perfect Nash equilibrium of a repeated demand management game and develop an incentive-compatible trigger-and-punishment mechanism to avoid the noncooperative behavior of the building managers. Numerical results demonstrate that the cooperative demand response scheme can reduce the electricity costs, the electricity price, and the total energy consumption.