# Demand Response Requirements from the Cultural, Social, and Behavioral Perspectives
## 3 Customers' Sensitivity to Electricity Price and Electricity Consumption  
Customers' reactions to the implementation of various DR programs are different. Many mathematical models have been proposed to predict customer reactions. For instance, DR models can be presented using the concept of demand-price elasticity [84]. Demand-price elasticity is defined as the sensitivity of the customers to adjust their load profile in response to the changes in the electricity prices [85; 86]. Changes in demand with respect to prices can be modeled, using linear or nonlinear functions [84; 87]. Different customers' attitudes and behaviors lead to variations in the selection and execution of DR programs at different times. As a result, these attitudes and behaviors should be evaluated in addition to the preceding examples. By presenting a flexible model, time can be included in the model [88]. Some DR models are based on optimization methods [89]. Customers' logical behavior is the fundamental premise in the optimization-based approach. The maximizing of desirability or minimizing the costs might be used as the problem's objective function.  
In the psychology and behavioral economics domain, non-financial interventions can be successful, such as money incentives in changing consumers' consumption behaviors [90]. In this regard, special attention can be paid to the energy policy. Rewards and penalties are two strategies that can change the consumption pattern of customers [85]. Although both of these strategies can lead to behavior modification in the short term, research studies have shown that incentives can also contribute to habit formation in the long term [91]. According to this theory, even if the long-term incentive-based DR programs are no longer be implemented in a system, most of their positive effects are anticipated to persist, due to habit formation [92]. Many researchers have also studied the effect of electricity prices on customers' behaviors to reduce energy consumption. The findings reveal a strong relationship between financial incentives and customers' behavioral traits [93; 94].  
Based on human behavior studies, it can be concluded that the customers' responses to penalties and rewards are not the same [95]. This is contrary to the classical economics assumption that customer behavior is linear. Additionally, the \"loss aversion\" concept could be considered, which is one of the most well-known psychological theories of human behavior [96]. The concept of loss aversion implies that people generally prefer to lose less rather than gain more [97]. In other words, in the financial behavioral domain, the fear of losing is a far bigger stimulant than the desire to profit. Most psychological research studies show that the fear of losing is around twice as strong as the desire to earn [98].  
According to the behavioral economics research studies, the effect of loss on a person's inner feeling is much stronger than profit [99]. Figure 1 illustrates an example of the desirability function. As a result of the introduced concepts, the curve slope is greater in the loss area than the profit area. In micro and classical economic theories, it is always assumed that an equal amount of profit or loss produces the same participation level. However, such an assumption is incorrect, considering human behavior characteristics [96]. In high-risk and low-risk situations, the level of loss aversion is different. It is worth noting that in high-risk circumstances, the slope of the desirability function curve is larger.