In the restructured electricity markets, the demand response programs (DRPs) are defined as participation of the
retail consumers to observe and respond to changing prices over the time. Generally, DRPs are classified as
incentive-based and time-based programs. By using the precise modeling of DRPs, the operator of the system can
study the effect of price responsive loads in reliability and economic aspects of the system. In this paper, a
nonlinear model of incentive-based DRP is developed based on the price elasticity of demand and benefit
function of the customer. The behaviors of the derived models against elasticity change, incentive, penalty and
potential of implementation are examined and degree of the reliance is determined. In order to investigate the
performance of the proposed model, a numerical study is provided derived from a real world power system. The
comparison results show that the power structure as non-linear model is the most conservative while the linear
model is the most non-conservative.