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This paper aims to provide a novel framework for optimal congestion management via encouraging a collaboration between the independent system operator (ISO) and Retail electricity companies (Recos) in implementing demand response (DR) programs based on the market mechanism. The merit of this paper is to increase the market efficiency. Three economic signals, namely, demand reduction, congestion elasticity, and electricity spot price values, specified by the ISO, are used for assisting Recos in evaluating any benefits from implementing DR in various network buses. A Stackelberg game is adopted for designing a DR trade between Recos and demand response aggregators to help Recos identifying their optimal demands in the market, which are then used by the ISO to analyze grid congestion and consequently to re-specify the new economic signals. The game is repeated until the Nash equilibrium point, the optimal congestion reduction, and the optimal Recos' demands are obtained. The performance of the proposed framework is assessed using a test power system, and the results are compared with the current practices in the Australian electricity market. This paper demonstrates an effective performance of the proposed framework.