IDEAS home Printed from https://ideas.repec.org/a/eee/eneeco/v43y2014icp89-101.html
   My bibliography  Save this article

A network game analysis of strategic interactions in the international trade of Russian natural gas through Ukraine and Belarus

Author

Listed:
  • Nagayama, Daisuke
  • Horita, Masahide

Abstract

Natural gas is an important source of relatively low-emission, low-cost, non-nuclear and abundant energy; however, the difficulty of storage and transportation adds geopolitical and geostrategic complexity to its international trade. Much of the global natural gas trade occurs through natural gas pipelines, which as an infrastructure is strictly specific to the transportation of natural gas. Therefore, the very structure of natural gas pipeline networks can dictate the strategic relationship among countries involved in its trade. This paper applies a Network Game Model where these pipeline networks are modeled as graphs and respective value functions, and employs the Link-based Flexible Network Allocation Rule developed by Jackson (2005) as a solution concept to measure the relative power structure among these natural gas trading countries. The paper analyzes the case of trade between Russia, Ukraine, Belarus and Western Europe, and compares the results to existing analyses that employ a Cooperative Game Model in Characteristic Function Form and the Shapley Value as the solution concept. Whereas the results of the analysis conducted in the previous literature indicate that Russia's relative power was significantly stronger than other players both before and after the construction of the Nord Stream pipeline, the results provided in this paper draw a different conclusion. Ukraine's relative power was already equal to that of Russia before the Nord Stream. This may be understood as one of the underlying causes for the prolonged conflicts that occurred repeatedly in this region concerning natural gas trade.

Suggested Citation

  • Nagayama, Daisuke & Horita, Masahide, 2014. "A network game analysis of strategic interactions in the international trade of Russian natural gas through Ukraine and Belarus," Energy Economics, Elsevier, vol. 43(C), pages 89-101.
    • Handle: RePEc:eee:eneeco:v:43:y:2014:i:c:p:89-101
    DOI: 10.1016/j.eneco.2014.02.010
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0140988314000371
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eneco.2014.02.010?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jackson, Matthew O., 2005. "Allocation rules for network games," Games and Economic Behavior, Elsevier, vol. 51(1), pages 128-154, April.
    2. Jackson, Matthew O. & Wolinsky, Asher, 1996. "A Strategic Model of Social and Economic Networks," Journal of Economic Theory, Elsevier, vol. 71(1), pages 44-74, October.
    3. Roger B. Myerson, 1977. "Graphs and Cooperation in Games," Mathematics of Operations Research, INFORMS, vol. 2(3), pages 225-229, August.
    4. Franz Hubert & Svetlana Ikonnikova, 2011. "Investment Options And Bargaining Power: The Eurasian Supply Chain For Natural Gas," Journal of Industrial Economics, Wiley Blackwell, vol. 59(1), pages 85-116, March.
    5. Chyong, C.K. & Noël, P. & Reiner, D.M., 2010. "The Economics of the Nord Stream Pipeline System," Cambridge Working Papers in Economics 1051, Faculty of Economics, University of Cambridge.
    6. Stern, Jonathan, 2005. "The Future of Russian Gas and Gazprom," OUP Catalogue, Oxford University Press, number 9780197300312, Decembrie.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Churkin, Andrey & Pozo, David & Bialek, Janusz & Korgin, Nikolay & Sauma, Enzo, 2019. "Can cross-border transmission expansion lead to fair and stable cooperation? Northeast Asia case analysis," Energy Economics, Elsevier, vol. 84(C).
    2. Mihai Daniel Roman & Diana Mihaela Stanculescu, 2021. "An Analysis of Countries’ Bargaining Power Derived from the Natural Gas Transportation System Using a Cooperative Game Theory Model," Energies, MDPI, vol. 14(12), pages 1-13, June.
    3. Goodell, John W. & Gurdgiev, Constantin & Paltrinieri, Andrea & Piserà, Stefano, 2023. "Global energy supply risk: Evidence from the reactions of European natural gas futures to Nord Stream announcements," Energy Economics, Elsevier, vol. 125(C).
    4. Karaca, Orcun & Delikaraoglou, Stefanos & Hug, Gabriela & Kamgarpour, Maryam, 2022. "Enabling inter-area reserve exchange through stable benefit allocation mechanisms," Omega, Elsevier, vol. 113(C).
    5. Girma T. Chala & Abd Rashid Abd Aziz & Ftwi Y. Hagos, 2018. "Natural Gas Engine Technologies: Challenges and Energy Sustainability Issue," Energies, MDPI, vol. 11(11), pages 1-44, October.
    6. Filip Božić & Daria Karasalihović Sedlar & Ivan Smajla & Ivana Ivančić, 2021. "Analysis of Changes in Natural Gas Physical Flows for Europe via Ukraine in 2020," Energies, MDPI, vol. 14(16), pages 1-22, August.
    7. Veronika Grimm & Lars Schewe & Martin Schmidt & Gregor Zöttl, 2019. "A multilevel model of the European entry-exit gas market," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 89(2), pages 223-255, April.
    8. Aram Lee & Jeonghwan Kim, 2023. "Analysis of Bargaining Power between the EU and Russia by Altering Gas Supply Network Structure," Sustainability, MDPI, vol. 15(5), pages 1-12, March.
    9. Huan Chen & Lixin Tian & Minggang Wang & Zaili Zhen, 2017. "Analysis of the Dynamic Evolutionary Behavior of American Heating Oil Spot and Futures Price Fluctuation Networks," Sustainability, MDPI, vol. 9(4), pages 1-29, April.
    10. Khalili-Damghani, Kaveh & Tavana, Madjid & Santos-Arteaga, Francisco J. & Mohtasham, Sima, 2015. "A dynamic multi-stage data envelopment analysis model with application to energy consumption in the cotton industry," Energy Economics, Elsevier, vol. 51(C), pages 320-328.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Caulier, Jean-François & Mauleon, Ana & Vannetelbosch, Vincent, 2015. "Allocation rules for coalitional network games," Mathematical Social Sciences, Elsevier, vol. 78(C), pages 80-88.
    2. Joost Vandenbossche & Thomas Demuynck, 2013. "Network Formation with Heterogeneous Agents and Absolute Friction," Computational Economics, Springer;Society for Computational Economics, vol. 42(1), pages 23-45, June.
    3. Kamijo, Yoshio, 2009. "A linear proportional effort allocation rule," Mathematical Social Sciences, Elsevier, vol. 58(3), pages 341-353, November.
    4. C. Manuel & D. Martín, 2021. "A value for communication situations with players having different bargaining abilities," Annals of Operations Research, Springer, vol. 301(1), pages 161-182, June.
    5. Swapnil Dhamal & Y. Narahari, 2015. "Formation of Stable Strategic Networks with Desired Topologies," Studies in Microeconomics, , vol. 3(2), pages 158-213, December.
    6. Jackson, Matthew O. & Zenou, Yves, 2015. "Games on Networks," Handbook of Game Theory with Economic Applications,, Elsevier.
    7. Pin, Paolo, 2011. "Eight degrees of separation," Research in Economics, Elsevier, vol. 65(3), pages 259-270, September.
    8. Newton, Jonathan, 2012. "Coalitional stochastic stability," Games and Economic Behavior, Elsevier, vol. 75(2), pages 842-854.
    9. Carayol, Nicolas & Delille, Rémy & Vannetelbosch, Vincent, 2015. "Allocating value among farsighted players in network formation," Economics Letters, Elsevier, vol. 137(C), pages 50-53.
    10. Joss Sánchez-Pérez, 2019. "Solutions for network games and symmetric group representations," Operations Research and Decisions, Wroclaw University of Science and Technology, Faculty of Management, vol. 29(4), pages 95-123.
    11. Navarro, Noemí, 2010. "Flexible network rules for identified externalities," Games and Economic Behavior, Elsevier, vol. 69(2), pages 401-410, July.
    12. P. Herings & Gerard Laan & Dolf Talman, 2007. "Socially Structured Games," Theory and Decision, Springer, vol. 62(1), pages 1-29, February.
    13. Hubert Franz & Cobanli Onur, 2015. "Pipeline Power: A Case Study of Strategic Network Investments," Review of Network Economics, De Gruyter, vol. 14(2), pages 75-110, June.
    14. Surajit Borkotokey & Sujata Goala & Niharika Kakoty & Parishmita Boruah, 2022. "The component-wise egalitarian Myerson value for Network Games," Papers 2201.02793, arXiv.org.
    15. Niharika Kakoty & Surajit Borkotokey & Rajnish Kumar & Abhijit Bora, 2023. "Weighted position value for Network games," Papers 2308.03494, arXiv.org.
    16. Matthew Elliott & Arun Chandrasekhar & Attila Ambrus, 2015. "Social Investments, Informal Risk Sharing, and Inequality," 2015 Meeting Papers 189, Society for Economic Dynamics.
    17. Borkotokey, Surajit & Chakrabarti, Subhadip & Gilles, Robert P. & Gogoi, Loyimee & Kumar, Rajnish, 2021. "Probabilistic network values," Mathematical Social Sciences, Elsevier, vol. 113(C), pages 169-180.
    18. Niharika Kakoty & Surajit Borkotokey & Rajnish Kumar & Abhijit Bora, 2024. "Weighted Myerson value for Network games," Papers 2402.11464, arXiv.org.
    19. Noemí NAVARRO & Róbert VESZTEG, 2007. "Fair ultimatum: an experimental study of the Myerson value," Cahiers de Recherches Economiques du Département d'économie 07.05, Université de Lausanne, Faculté des HEC, Département d’économie.
    20. Slikker, Marco, 2007. "Bidding for surplus in network allocation problems," Journal of Economic Theory, Elsevier, vol. 137(1), pages 493-511, November.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:43:y:2014:i:c:p:89-101. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eneco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.