This study develops a model to analyze the cost and profit structures faced by Independent System Operators (ISOs) and Demand Response Aggregators (DRAs) in South Korea's electricity demand response market. Based on this model, the study derives the socially optimal level of demand reduction and a settlement mechanism that maximizes overall welfare. In particular, to identify a compensation structure that minimizes operational costs while maintaining market participation incentives, the interaction between the hourly volatility of the system marginal price (SMP) and demand response participation levels is analyzed. Using hourly load and price data from 2023 onward, the model results suggest that expanding the volume of demand response beyond current levels and setting the settlement price at approximately 90--95% of the SMP can lead to a Pareto improvement. In this scenario, the ISO's market operation costs are significantly reduced, while the profits of DRAs increase. The magnitude of cost savings for the ISO varies with the time-varying elasticity of the SMP, whereas DRAs benefit from increased profits as the growth in demand response participation outweighs the slight decrease in settlement prices. These findings imply that sufficient incentives for market participation can be preserved even with moderate adjustments to the settlement ratio.