Revisiting Jansen et al.â€™s Modiï¬ed Cournot Model of the European Union Natural Gas Market
AbstractIn this paper we reconsider Jansen et al.â€™s (2012) Cournot model of the European Union natural gas market with three major suppliers Russian Gazprom, Norwegian Statoil, and Algerian Sonatrach. To reï¬‚ect Russiaâ€™s geopolitical consideration, we incorporate a relative market share to Gazpromâ€™s objective function. Compared with Jansen et al.â€™s use of standard market share, our study shows that the introduction of relative market share makes it not only possible to derive the same results in a more general environment, but also permits us to obtain clear-cut quantitative analysis results for equilibrium solution, consumer surplus, and social welfare. Our analysis also demonstrates for this modiï¬ed Cournot model that by seeking a proper market share, Gazprom can achieve the same profits of a Stackelberg leader in a simultaneous move model as in the classical sequential move leader-follower model. When Gazprom pursues the control of market share besides proï¬ts, it will be good news for the EUâ€™s consumers but bad news for its rivals.
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Bibliographic InfoPaper provided by Department of Economics, University of York in its series Discussion Papers with number 13/12.
Date of creation: Jun 2013
Date of revision:
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Natural gas market; Cournot model; Stackelberg leaderâ€™s advantage; Nonproï¬t incentives; Relative market share; European Union;
Find related papers by JEL classification:
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
- 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
- L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-05 (All new papers)
- NEP-CIS-2013-07-05 (Confederation of Independent States)
- NEP-COM-2013-07-05 (Industrial Competition)
- NEP-ENE-2013-07-05 (Energy Economics)
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.:
- Bilgin, Mert, 2009. "Geopolitics of European natural gas demand: Supplies from Russia, Caspian and the Middle East," Energy Policy, Elsevier, vol. 37(11), pages 4482-4492, November.
- Jansen, Thijs & van Lier, Arie & van Witteloostuijn, Arjen, 2007. "A note on strategic delegation: The market share case," International Journal of Industrial Organization, Elsevier, vol. 25(3), pages 531-539, June.
- Jansen, Thijs & van Lier, Arie & van Witteloostuijn, Arjen & Boon von Ochssée, Tim, 2012. "A modified Cournot model of the natural gas market in the European Union: Mixed-motives delegation in a politicized environment," Energy Policy, Elsevier, vol. 41(C), pages 280-285.
- Finon, Dominique & Locatelli, Catherine, 2008. "Russian and European gas interdependence: Could contractual trade channel geopolitics?," Energy Policy, Elsevier, vol. 36(1), pages 423-442, January.
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