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Influence of structure and ownership of lignite opencast mine and power plant bilateral monopoly on its operation

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Author Info
Jurdziak, Leszek

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Abstract

Lignite mine and power plant can operate as two separate entities, two entities in one holding or joint venture and as the one vertically integrated energy producer. Each of these solutions has the influence on operation of this tandem including realization of its individual and joint objectives, price negotiation, transactional costs, irreversible investments (sunk costs), different access to information (asymmetric information), cooperation or rivalry, possibility of opportunistic behaviour and other threats, which can be used against the second side. An attempt has been made to show these problems from the point of view of economic effectiveness based on a bilateral monopoly (BM) model and game theory approach with usage of pit optimisation methods. Advantages and disadvantages of different solutions have been presented as well as rational incentives to vertical integration due to inherent conflict of individual and group rationality in BM. This conflict of interest can lead to Pareto sub optimal solution in case of lack of cooperation between both sides. Concentration on lignite price can lead to waste of potential profit and decrease of mineable reserves - excavation of smaller pit, which is optimal only to the mine but not to the whole BM.

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File URL: http://mpra.ub.uni-muenchen.de/2467/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 2467.

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Date of creation: 2006
Date of revision: 20 Mar 2007
Handle: RePEc:pra:mprapa:2467

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Related research
Keywords: bilateral monopoly; lignite mine; lignite power plant; price negotitiation; vertical structure; vertical integration; lignite price; opportunism; asymmetry of information; deposit knowledge; ownership structure; cooperative game; zero sum game; non-zero suma game; Pareto optimality; profit division; individual rationality; group rationality; long-term contract;

Find related papers by JEL classification:
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources
L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations
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
L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
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
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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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This page was last updated on 2009-11-24.

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