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Trade Quotas And Buyer Power, With An Application To The E.U. Natural Gas Market


  • Svetlana Ikonnikova
  • Gijsbert T.J. Zwart


We consider a market in which domestic buyers negotiate contracts with foreign sellers, and explore how trade quotas can help to increase the buyers' countervailing power. We use the Shapley value to describe bargaining power and the distribution of the trade surplus in such a bilateral oligopoly. By exploiting strategic externalities among the buyers, bilateral trade quotas can improve the buyers' bargaining positions. In contrast, aggregate trade restrictions on all buyers' trade never improve buyer surplus. Minimum quotas on imports from fringe suppliers can benefit nonaffected buyers, as these enjoy positive externalities. We apply these insights to the E.U. market for natural gas and show that the effects of trade quotas on E.U. gas importers' power can be significant.

Suggested Citation

  • Svetlana Ikonnikova & Gijsbert T.J. Zwart, 2014. "Trade Quotas And Buyer Power, With An Application To The E.U. Natural Gas Market," Journal of the European Economic Association, European Economic Association, vol. 12(1), pages 177-199, February.
  • Handle: RePEc:bla:jeurec:v:12:y:2014:i:1:p:177-199

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    Cited by:

    1. repec:eee:eneeco:v:78:y:2019:i:c:p:174-181 is not listed on IDEAS
    2. repec:eee:eneeco:v:76:y:2018:i:c:p:170-185 is not listed on IDEAS
    3. repec:eee:ejores:v:273:y:2019:i:3:p:1097-1108 is not listed on IDEAS
    4. Hubert, Franz & Orlova, Ekaterina, 2018. "Network access and market power," Energy Economics, Elsevier, vol. 76(C), pages 170-185.
    5. Robert A. Ritz, 2016. "Strategic investment, multimarket interaction and competitive advantage: An application to the natural gas industry," Cambridge Working Papers in Economics 1603, Faculty of Economics, University of Cambridge.

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