With the grasp of a smart grid in sight, discussions have shifted the focus of system security measures away from generation capacity; apart from modifying the supply side, demand may also be exploited to keep the system in balance. Specifically, Demand Response (DR) is the concept of consumer load modification as a result of price signaling, generation adequacy, or state of grid reliability. Implementation of DR mechanisms is one of the solutions being investigated to improve the efficiency of electricity markets and to maintain system-wide stability. In a liberalized electricity sector, with a smart grid vision that is committed to market-based operation, end-users have now become the focal point of decision-making at every stage of the process in producing, delivering and consuming electricity. DR program implementation falls within the smart grid domain: a complex socio-technical energy system with a multiplicity of physical, economic, political and social interactions. This thesis thus employs both qualitative and quantitative research methods in order to address the ways in which residential end-users can become active DR flexibility providers in deregulated European electricity markets. The research focuses on economic incentives including dynamic pricing contracts, dynamic distribution price signals and the aggregation of load flexibility for participation in the various short-term electricity markets.