Dynamic pricing and strategic retailers in the energy sector: a multi-leader-follower approach

Research output: Contribution to journalResearch articleContributedpeer-review


  • Giorgia Oggioni - , University of Brescia (Author)
  • Alexandra Schwartz - , Faculty of Mathematics (Author)
  • Ann-Kathrin Wiertz - , Friedrich-Alexander University Erlangen-Nürnberg (Author)
  • Gregor Zöttl - , Friedrich-Alexander University Erlangen-Nürnberg (Author)


We consider strategic retail pricing in markets, where retail companies buy commodities at fluctuating wholesale prices and resell them to final consumers by applying dynamic retail tariffs. This is of especially large relevance in the context of energy markets where substantial wholesale price fluctuations are observed. Policy makers currently foster the introduction of such dynamic tariff schemes. From a modelling point of view, we propose a multi-leader-follower problem to investigate the implications of strategic retail pricing and we compare the impacts of implementing dynamic tariffs on retailers and final consumers. Our analysis tackles different aspects: first, we formulate the model and provide theoretical results. Second, we develop algorithms, which solve the multi-leader-follower problem and allow us to characterize the resulting market equilibria. Third, we calibrate and solve our framework based on data of the German retail electricity market for the years 2020 and 2021. This allows us to quantitatively assess the impact of introducing real time prices on retailers’ profits and customers’ benefits. As our results show, dynamic real-time pricing on the one hand typically increases market efficiency, which confirms previous results obtained without the explicit consideration of strategic behavior. On the other hand, however, as a novel aspect, dynamic real-time pricing turns out to significantly reduce equilibrium profits in case of strategic firms. This effect is especially large in environments with strongly fluctuating wholesale prices.


Original languageEnglish
Pages (from-to)255-272
Number of pages18
JournalEuropean Journal of Operational Research
Issue number1
Publication statusPublished - 1 Jan 2024

External IDs

Scopus 85166350027
Mendeley 4b40e195-5cdf-38f9-ae18-4b84a09388d4



  • Dynamic tariffs, Multi-leader-follower, OR in energy, Pricing, Retailers

Library keywords