  An existing challenge in power systems is the implementation of optimal
demand management through dynamic pricing. This paper encompasses the design,
analysis and implementation of a novel on-line pricing scheme based on
coalitional game theory. The setting consists of a network with multiple energy
retailers competing to attract consumers by announcing a price in a
hierarchical leader-follower structure. The process of coalition formation
under such a pricing scheme can be viewed as a game for which we show that a
Stackelberg equilibrium exists, \ie given a price, consumers will respond by
conforming to a reciprocal power consumption quantity. We propose a coalition
formation algorithm and perform a game-theoretic stability analysis on the
resulting coalitions. We integrate the pricing setting with a resistive
micro-grid dynamic model. In this context we analyse the behaviour of the
integrated system, bridging the gap between market and physical layers of the
problem. Simulations provide a comparison of profits generated by the proposed
scheme against a more traditional single retailer scheme, while simultaneously
showing convergence towards a steady-state equilibrium. Additionally, we shed
light into the system's physical response when subject to our proposed pricing
scheme.
