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In this work, we use a Stackelberg infinite discrete-time dynamic game modelto study the optimal supply schedule and the optimal demand response under amarket-driven dynamic price. A two-layer optimization framework is established.At the lower layer, for each user, different appliances are scheduled forenergy consumption. For enegy provider, different generators are utilized forenergy generation. At the upper level, with the supplier acting as a leader andthe users acting as followers, a Stackelberg dynamic game is used to capturethe interaction among the energy provider and the users where the energyprovider and the users care only about their own cost. We analyze theone-leader-N-followers Stackelberg dynamic game and characterize theStackelberg equilibrium. We provide a closed-form Nash solution of the optimaldynamic demand response problem when the supply is announced. A set of linearconstraints is developed to characterize the Stackeberg equilibrium. Simulationresults show that the price is driven to a reasonable value. Also, the totaldemand and the supply is balanced.

Optimal Demand Response and Supply Schedule Under Market-Driven Price: A Stackelberg Dynamic Game Approach