Investment Options and Bargaining Power the Eurasian Supply Chain for Natural Gas
AbstractWe use cooperative game theory to analyze how the architecture of the pipeline network determines the power structure in the supply chain for Russian gas. If the assessment is narrowly focused on the abilities to obstruct flows in the existing system, the main transit countries, Belarus and Ukraine, appear to be strong. If investment options are accounted for, however, Russia achieves clear dominance. We show that options to bypass one of the transit countries are of little strategic importance compared to Russia's direct access to its customers through the Baltic Sea. Comparing the results of our calibrated model with empirical evidence obtained from transit and import agreements we find that the Shapley value explains the power of major transit countries better than the core and the nucleolus.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 17854.
Date of creation: Sep 2009
Date of revision:
Bargaining Power; Supply Chain; Shapley Value; Gas Transport;
Other versions of this item:
- Franz Hubert & Svetlana Ikonnikova, 2011. "Investment Options And Bargaining Power: The Eurasian Supply Chain For Natural Gas," Journal of Industrial Economics, Wiley Blackwell, vol. 59(1), pages 85-116, 03.
- F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
- C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
- F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-24 (All new papers)
- NEP-ENE-2009-10-24 (Energy Economics)
- NEP-TRA-2009-10-24 (Transition Economics)
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- Robert Ritz, 2013. "Price Discrimination and Limits to Arbitrage in Global LNG Markets," Cambridge Working Papers in Economics 1340, Faculty of Economics, University of Cambridge.
- Le Coq, Chloe & Paltseva, Elena, 2012. "The EU-Russia Gas Relationship: a mutual dependency," SITE Working Paper Series 18, Stockholm Institute of Transition Economics, Stockholm School of Economics.
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- Nick, Sebastian & Thoenes, Stefan, 2013. "What Drives Natural Gas Prices? - A Structural VAR Approach," EWI Working Papers 2013-2, Energiewirtschaftliches Institut an der Universitaet zu Koeln.
- Roberto Roson & Franz Hubert, 2014. " Bargaining Power and Value Sharing in Distribution Networks: a Cooperative Game Theory Approach," Working Papers 2014:02, Department of Economics, University of Venice "Ca' Foscari".
- Dominique Finon & Catherine Locatelli, 2008. "Russian and European gas interdependence. Can market forces balance out geopolitics?," Post-Print halshs-00129618, HAL.
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