Analysis of the World Market for Steam Coal Using a Complementarity Model
AbstractWith its resource availability and the prospect of climate friendly technology, coal continues to play an important role in the global energy sector. We develop a complementarity model of the international market for steam coal. We want to analyze the level of competition in this market which is strategic for the importers' security of energy supply. In a spatial equilibrium framework, we assume the steam coal exporters to maximize their profits by choosing the optimal quantity to sell to each importing country. We compare two possible scenarios: perfect competition and Cournot competition. The results, especially the price levels, indicate that the Cournot model is not realistic, suggesting that the producing countries do not exert market power. However, the trade flows and prices observed in reality suggests that there is some form of market power with price discrimination, possibly following a Bertrand model in a spatial setting.
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Bibliographic InfoPaper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 818.
Length: 18 p.
Date of creation: 2008
Date of revision:
Coal; energy; market structure; simulation model;
Find related papers by JEL classification:
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources
- C69 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-09-29 (All new papers)
- NEP-COM-2008-09-29 (Industrial Competition)
- NEP-ENE-2008-09-29 (Energy Economics)
- NEP-MIC-2008-09-29 (Microeconomics)
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