IDEAS home Printed from https://ideas.repec.org/a/eee/appene/v308y2022ics0306261921015026.html
   My bibliography  Save this article

A refined consumer behavior model for energy systems: Application to the pricing and energy-efficiency problems

Author

Listed:
  • Zhang, Chao
  • Lasaulce, Samson
  • Wang, Li
  • Saludjian, Lucas
  • Poor, H. Vincent

Abstract

Sum-utility maximization is an important problem in the optimization of energy systems. A conventional assumption in addressing this problem is that the utility to be maximized is concave. But for some key applications, such an assumption is not reasonable and does not reflect well the actual behavior of the consumer. To address this issue, the authors pose and address a more general optimization problem, namely by assuming the consumer’s utility to be sigmoidal and in a given class of functions. The considered class of functions is attractive for at least two reasons. First, the classical NP-hardness issue associated with sum-utility maximization is circumvented. Second, the considered class of functions encompasses well-known performance metrics used to analyze problems of pricing and energy-efficiency. This allows one to design a new and optimal inclining block rate (IBR) pricing policy which also has the virtue of flattening the power consumption and reducing the peak power. We also show how to maximize the energy-efficiency using a low-complexity algorithm. When compared to existing policies, simulations fully support the benefit of using the proposed approach.

Suggested Citation

  • Zhang, Chao & Lasaulce, Samson & Wang, Li & Saludjian, Lucas & Poor, H. Vincent, 2022. "A refined consumer behavior model for energy systems: Application to the pricing and energy-efficiency problems," Applied Energy, Elsevier, vol. 308(C).
    • Handle: RePEc:eee:appene:v:308:y:2022:i:c:s0306261921015026
    DOI: 10.1016/j.apenergy.2021.118239
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0306261921015026
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.apenergy.2021.118239?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hui, Hongxun & Ding, Yi & Shi, Qingxin & Li, Fangxing & Song, Yonghua & Yan, Jinyue, 2020. "5G network-based Internet of Things for demand response in smart grid: A survey on application potential," Applied Energy, Elsevier, vol. 257(C).
    2. Zhang, Chao & Lasaulce, Samson & Hennebel, Martin & Saludjian, Lucas & Panciatici, Patrick & Poor, H. Vincent, 2021. "Decision-making oriented clustering: Application to pricing and power consumption scheduling," Applied Energy, Elsevier, vol. 297(C).
    3. Liang, Yong-Liang & Guo, Chen-Xian & Li, Ke-Jun & Li, Ming-Yang, 2021. "Economic scheduling of compressed natural gas main station considering critical peak pricing," Applied Energy, Elsevier, vol. 292(C).
    4. Good, Nicholas, 2019. "Using behavioural economic theory in modelling of demand response," Applied Energy, Elsevier, vol. 239(C), pages 107-116.
    5. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    6. Wang, Jianxiao & Zhong, Haiwang & Ma, Ziming & Xia, Qing & Kang, Chongqing, 2017. "Review and prospect of integrated demand response in the multi-energy system," Applied Energy, Elsevier, vol. 202(C), pages 772-782.
    7. Quattrone, George A. & Tversky, Amos, 1988. "Contrasting Rational and Psychological Analyses of Political Choice," American Political Science Review, Cambridge University Press, vol. 82(3), pages 719-736, September.
    8. Wang, Yong & Li, Lin, 2015. "Time-of-use electricity pricing for industrial customers: A survey of U.S. utilities," Applied Energy, Elsevier, vol. 149(C), pages 89-103.
    9. Drechsler, Martin & Wätzold, Frank, 2020. "Biodiversity conservation in a dynamic world may lead to inefficiencies due to lock-in effects and path dependence," Ecological Economics, Elsevier, vol. 173(C).
    10. Peter C. Reiss & Matthew W. White, 2005. "Household Electricity Demand, Revisited," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(3), pages 853-883.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Liu, Yinyan & Ma, Jin & Xing, Xinjie & Liu, Xinglu & Wang, Wei, 2022. "A home energy management system incorporating data-driven uncertainty-aware user preference," Applied Energy, Elsevier, vol. 326(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hibbs, Douglas A, Jr, 2000. "Bread and Peace Voting in U.S. Presidential Elections," Public Choice, Springer, vol. 104(1-2), pages 149-180, July.
    2. Schnellenbach, Jan & Schubert, Christian, 2015. "Behavioral political economy: A survey," European Journal of Political Economy, Elsevier, vol. 40(PB), pages 395-417.
    3. Steven B. Redd, 2002. "The Influence of Advisers on Foreign Policy Decision Making," Journal of Conflict Resolution, Peace Science Society (International), vol. 46(3), pages 335-364, June.
    4. Salvatore Greco & Fabio Rindone, 2014. "The bipolar Choquet integral representation," Theory and Decision, Springer, vol. 77(1), pages 1-29, June.
    5. Tobias Mutter & Dennis Kundisch, 2014. "Goals as Reference Points: Empirical Evidence from a Virtual Reward System," Working Papers Dissertations 19, Paderborn University, Faculty of Business Administration and Economics.
    6. Peter Wakker & Veronika Köbberling & Christiane Schwieren, 2007. "Prospect-theory’s Diminishing Sensitivity Versus Economics’ Intrinsic Utility of Money: How the Introduction of the Euro can be Used to Disentangle the Two Empirically," Theory and Decision, Springer, vol. 63(3), pages 205-231, November.
    7. Pedro Linares & Xavier Labandeira, 2010. "Energy Efficiency: Economics And Policy," Journal of Economic Surveys, Wiley Blackwell, vol. 24(3), pages 573-592, July.
    8. Ran, Cuiling & Zhang, Yanzi & Yin, Ying, 2021. "Demand response to improve the shared electric vehicle planning: Managerial insights, sustainable benefits," Applied Energy, Elsevier, vol. 292(C).
    9. Paul K. Huth, 1990. "The Extended Deterrent Value of Nuclear Weapons," Journal of Conflict Resolution, Peace Science Society (International), vol. 34(2), pages 270-290, June.
    10. Kirchem, Dana & Lynch, Muireann Á. & Bertsch, Valentin & Casey, Eoin, 2020. "Modelling demand response with process models and energy systems models: Potential applications for wastewater treatment within the energy-water nexus," Applied Energy, Elsevier, vol. 260(C).
    11. Dhami, Sanjit & Al-Nowaihi, Ali, 2010. "Optimal taxation in the presence of tax evasion: Expected utility versus prospect theory," Journal of Economic Behavior & Organization, Elsevier, vol. 75(2), pages 313-337, August.
    12. Astrid Gamba & Anna Bottasso, 2019. "Consumer inertia in energy markets: Insights from behavioral economics," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2019(3), pages 113-130.
    13. Heribert Gierl & Hans Höser, 2002. "Der Reihenfolgeeffekt auf Präferenzen," Schmalenbach Journal of Business Research, Springer, vol. 54(1), pages 3-18, February.
    14. Mohseni, Soheil & Brent, Alan C. & Kelly, Scott & Browne, Will N. & Burmester, Daniel, 2021. "Strategic design optimisation of multi-energy-storage-technology micro-grids considering a two-stage game-theoretic market for demand response aggregation," Applied Energy, Elsevier, vol. 287(C).
    15. Kuehnhanss, Colin R. & Heyndels, Bruno & Hilken, Katharina, 2015. "Choice in politics: Equivalency framing in economic policy decisions and the influence of expertise," European Journal of Political Economy, Elsevier, vol. 40(PB), pages 360-374.
    16. Prasanna, Ashreeta & Mahmoodi, Jasmin & Brosch, Tobias & Patel, Martin K., 2018. "Recent experiences with tariffs for saving electricity in households," Energy Policy, Elsevier, vol. 115(C), pages 514-522.
    17. Vincenzo Carrieri & Maria De Paola & Francesca Gioia, 2021. "The health-economy trade-off during the Covid-19 pandemic: Communication matters," PLOS ONE, Public Library of Science, vol. 16(9), pages 1-25, September.
    18. Lv, Si & Wei, Zhinong & Chen, Sheng & Sun, Guoqiang & Wang, Dan, 2021. "Integrated demand response for congestion alleviation in coupled power and transportation networks," Applied Energy, Elsevier, vol. 283(C).
    19. Konstantina Valogianni & Wolfgang Ketter & John Collins & Dmitry Zhdanov, 2020. "Sustainable Electric Vehicle Charging using Adaptive Pricing," Production and Operations Management, Production and Operations Management Society, vol. 29(6), pages 1550-1572, June.
    20. Carrieri, Vincenzo & De Paola, Maria & Gioia, Francesca, 2020. "The Health-Wealth Trade-off during the COVID-19 Pandemic: Communication Matters," IZA Discussion Papers 13943, Institute of Labor Economics (IZA).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:appene:v:308:y:2022:i:c:s0306261921015026. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/405891/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.