Lignite price and split of profit negotiation in bilateral monopoly of lignite opencast mine and power plant

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Lignite price and split of profit negotiation in bilateral monopoly of lignite opencast mine and power plant

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Jurdziak, Leszek

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Leszek Piotr Jurdziak

Abstract

The newest outcome of bilateral monopoly (BM) of lignite opencast mine & power plant analysis have been discussed. The determinism of optimal solution maximising joint profits not only in quantity of lignite - the size and shape of the ultimate pit (characteristic to classical solution) but also in its price has been stressed. It is proposed to treat negotiation between power plant and mine as a cooperative, two-stage, two-person, non zero-sum game. In the first stage the ultimate pit maximising joint profits of BM should be chosen and in the second one, during bargaining, the split of profit ought to be decided together with choosing the transfer price of lignite. The level of lignite prices has been presented in the time of their control and confirmation (1996-2003) as well as their new profit sharing role in the period of their freely negotiation. The Nash bargaining solution has been proposed as a tool for equitable split of profit in BM due to its rational conditions. The application of this solution on example from the “Szczerców” deposit has been presented.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 2466.

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Date of creation: 2006
Date of revision: 20 Mar 2007
Handle: RePEc:pra:mprapa:2466

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Find related papers by JEL classification:
R32 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location - - - Other Production and Pricing Analysis
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply
L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply
D4 - Microeconomics - - Market Structure and Pricing
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
L0 - Industrial Organization - - General
D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

This paper has been announced in the following NEP Reports:

NEP-ALL-2007-04-09 (All new papers)
NEP-ENE-2007-04-09 (Energy Economics)

References listed on IDEAS
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Blair, Roger D & Kaserman, David L, 1987. "A Note on Bilateral Monopoly and Formula Price Contracts," American Economic Review, American Economic Association, vol. 77(3), pages 460-63, June. [Downloadable!] (restricted)
Jurdziak, Leszek, 2006. "Schemat arbitrażowy Nasha, a podział zysków w bilateralnym monopolu kopalni węgla brunatnego i elektrowni. Cześć pierwsza – podstawy teoretyczne
[Nash bargaining solution and the split of p," MPRA Paper 4142, University Library of Munich, Germany, revised 17 Jan 2006. [Downloadable!]

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