The main contribution of this report is to develop a theoretical model of the interaction between retail and wholesale markets and to analyze properties of this dynamical model. The behavior by the fl
exible loads, when combined with interaction of the retail market with the wholesale market creates a dynamical system. It is then of interest to understand the behavior of this dynamical system - this analysis will be useful in determining the impact of the market architecture on price volatility, generator dispatch, congestion in
the transmission system etc.