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The impact of who decides the rules for network use: A 'common pool' analysis of the investment dynamics in different gas network regulatory frames

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  • Michelle Hallack
  • Miguel Vazquez

Abstract

The liberalization of the natural gas industry has been based on the idea that infrastructure may be used by different gas owners. Different players using the same resources can give raise to 'commons dilemmas', which are defined by a conflict between individual rationality and group rationality. To avoid 'commons' inefficiencies, solutions are to establish rules that constrain the players' use of the network. In order to manage efficiently these situations, 'common pool' agreements can be established either through external authority or by the users themselves. In gas industries both can be found in practice. Public gas regulators can play the role of external authority in some countries, whereas in some other, the infrastructure rules are designed and implemented by the users themselves through players' agreements. Based on a simple game theoretical model, we compare the economics properties of the 'EU common carriage' and the 'US contract carriage' systems in term of static and dynamic efficiency. Our analysis allows us to identify missing economic signals in the EU regulatory framework both for static and dynamic efficiency.

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File URL: http://cadmus.eui.eu/bitstream/handle/1814/23928/RSCAS%20_2012_52.pdf?sequence=1
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File URL: http://hdl.handle.net/1814/23928
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Bibliographic Info

Paper provided by European University Institute in its series RSCAS Working Papers with number 2012/52.

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Date of creation: 01 Sep 2012
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Handle: RePEc:rsc:rsceui:2012/52

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  1. Hubbard, R Glenn & Weiner, Robert J, 1991. "Efficient Contracting and Market Power: Evidence from the U.S. Natural Gas Industry," Journal of Law and Economics, University of Chicago Press, vol. 34(1), pages 25-67, April.
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Cited by:
  1. Miguel Vazquez & Michelle Hallack, 2013. "Short-term allocation of gas networks in the EU and gas-electricity input foreclosure," RSCAS Working Papers 2013/41, European University Institute.
  2. Miguel Vazquez & Michelle Hallack & Jean-Michel Glachant, 2013. "Gas Network and Market: à la carte?," RSCAS Working Papers 2013/73, European University Institute.

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