We 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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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
17854.
Find related papers by JEL classification: F50 - International Economics - - International Relations and International Political Economy - - - General C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games F51 - International Economics - - International Relations and International Political Economy - - - International Conflicts; Negotiations; Sanctions D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
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