This dissertation studies how to characterize strategic behaviors in electricity markets from a transmission-constrained residual demand perspective. This dissertation generalizes the residual demand concept, widely used by economists in general markets, to electricity markets, which are constrained by transmission networks. The transmission-constrained residual demand is characterized by a sensitivity analysis of the optimal power flow program, which is the electricity market clearing engine. Methods are proposed to optimize a generator or generation firm's profit utilizing the residual demand sensitivity information, which has several advantages over existing methods. The transmission-constrained residual demand concept and the methods are helpful for market participants to develop bidding strategies and for market monitors to analyze market power in electricity markets. / text