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Modeling transfer profits as externalities in a cooperative game-theoretic model of natural gas networks

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  • Csercsik, Dávid
  • Hubert, Franz
  • Sziklai, Balázs R.
  • Kóczy, László Á.

Abstract

Existing cooperative game theoretic studies of bargaining power in gas pipeline systems are based on the so called characteristic function form (CFF). This approach is potentially misleading if some pipelines fall under regulated third party access (TPA). TPA, which is by now the norm in the EU, obliges the owner of a pipeline to transport gas for others, provided they pay a regulated transport fee. From a game theoretic perspective, this institutional setting creates so called “externalities”, the description of which requires partition function form (PFF) games. In this paper we propose a method to compute payoffs, reflecting the power structure, for a pipeline system with regulated TPA. The method is based on an iterative flow mechanism to determine gas flows and transport fees for individual players and uses the recursive core and the minimal claim function to convert the PPF game back into a CFF game, which can be solved by standard methods. We illustrate the approach with a simple stylized numerical example of the gas network in Central Eastern Europe with a focus on Ukraine's power index as a major transit country.

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  • Csercsik, Dávid & Hubert, Franz & Sziklai, Balázs R. & Kóczy, László Á., 2019. "Modeling transfer profits as externalities in a cooperative game-theoretic model of natural gas networks," Energy Economics, Elsevier, vol. 80(C), pages 355-365.
    • Handle: RePEc:eee:eneeco:v:80:y:2019:i:c:p:355-365
    DOI: 10.1016/j.eneco.2019.01.013
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    Cited by:

    1. V. A. Volkonsky & A. I. Kuzovkin, 2021. "Benefits and Losses for European Countries from the Northern Stream-2 Gas Pipeline: Overview of Estimates by Scientists and Energy Industries," Studies on Russian Economic Development, Springer, vol. 32(6), pages 689-694, November.
    2. Aram Lee & Jeonghwan Kim, 2023. "Analysis of Bargaining Power between the EU and Russia by Altering Gas Supply Network Structure," Sustainability, MDPI, vol. 15(5), pages 1-12, March.
    3. Kameng Nip & Changjun Wang & Zizhuo Wang, 2022. "Competitive and Cooperative Assortment Games under Markov Chain Choice Model," Production and Operations Management, Production and Operations Management Society, vol. 31(3), pages 1033-1051, March.
    4. Basso, Franco & Basso, Leonardo J. & Rönnqvist, Mikael & Weintraub, Andres, 2021. "Coalition formation in collaborative production and transportation with competing firms," European Journal of Operational Research, Elsevier, vol. 289(2), pages 569-581.
    5. Bin Meng & Haibo Kuang & Erxuan Niu & Jing Li & Zhenhui Li, 2020. "Research on the Transformation Path of the Green Intelligent Port: Outlining the Perspective of the Evolutionary Game “Government–Port–Third-Party Organization”," Sustainability, MDPI, vol. 12(19), pages 1-25, September.
    6. Csercsik, Dávid, 2022. "Convex combinatorial auction of pipeline network capacities," Energy Economics, Elsevier, vol. 111(C).
    7. Sziklai, Balázs R. & Kóczy, László Á. & Csercsik, Dávid, 2020. "The impact of Nord Stream 2 on the European gas market bargaining positions," Energy Policy, Elsevier, vol. 144(C).
    8. Han, Zhixin & Fang, Debin & Yang, Peiwen & Lei, Leyao, 2023. "Cooperative mechanisms for multi-energy complementarity in the electricity spot market," Energy Economics, Elsevier, vol. 127(PB).
    9. David Lowing, 2023. "Cost allocation in energy distribution networks," Working Papers hal-03680156, HAL.
    10. D'avid Csercsik, 2020. "Convex Combinatorial Auction of Pipeline Network Capacities," Papers 2002.06554, arXiv.org.

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    More about this item

    Keywords

    Externalities; Networks; Natural gas; Cooperative game theory; Recursive core;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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