In this paper, we have proposed a novel game-theoretical
decision-making scheme for electricity retailers in the smart
grid with DSM. We used various utility functions to model
electricity customers' preferences and consumption patterns.
The interaction between a retailer and its customers has been
modeled as a four-stage Stackelberg game. The rst three
stages of the game analyze how the retailer should make opti-
mal procurement and price decisions in order to maximize its
prot. The fourth stage of the game shows that howcustomers
dynamically adjust their electricity demands with the price
offered by the retailer to maximize their individual utility.
Backward induction is used to determine the SPE of the
four-stage Stackelberg game, since it captures the sequential
dependence of the decisions in the stages of the game. Sim-
ulation results have been presented to show the effectiveness
of the proposed scheme and how the system parameters affect
the decisions.