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A modified Cournot model of the natural gas market in the European Union: Mixed-motives delegation in a politicized environment

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Listed:
  • Jansen, Thijs
  • van Lier, Arie
  • van Witteloostuijn, Arjen
  • Boon von Ochssée, Tim

Abstract

With Gazprom gaining prominence as the major supplier of natural gas in the European Union, the European gas market becomes more politicized. We assume that Gazprom's interest as a state monopolist is not only to maximize profit, but also to seek market power, presumably because this contributes to the geopolitical power of Russia at large. We introduce a modeling tool, so-called strategic delegation games, to analyze the implications of Gazprom's operation in the EU. By way of illustration, we model the case where Gazprom competes against two profit-maximizing rivals: Algerian Sonatrach and Norwegian Statoil. We prove that if Gazprom serves any of a comprehensive type of nonprofit objectives, the outcome is beneficial for the EU's consumers, as Gazprom's behavior shifts volumes up and brings prices down.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:enepol:v:41:y:2012:i:c:p:280-285
    DOI: 10.1016/j.enpol.2011.10.047
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    References listed on IDEAS

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    Cited by:

    1. Anis Hoayek & Hassan Hamie & Hans Auer, 2020. "Modeling the Price Stability and Predictability of Post Liberalized Gas Markets Using the Theory of Information," Post-Print emse-03604655, HAL.
    2. Böttger, T. & Grimm, V. & Kleinert, T. & Schmidt, M., 2022. "The cost of decoupling trade and transport in the European entry-exit gas market with linear physics modeling," European Journal of Operational Research, Elsevier, vol. 297(3), pages 1095-1111.
    3. Catherine Locatelli, 2018. "La confrontation des systèmes institutionnels nationaux dans l'interdépendance : les échanges gaziers UE-Russie," Working Papers hal-01715932, HAL.
    4. James A. Brander & Barbara J. Spencer, 2015. "Endogenous Horizontal Product Differentiation under Bertrand and Cournot Competition: Revisiting the Bertrand Paradox," NBER Working Papers 20966, National Bureau of Economic Research, Inc.
    5. Mehdi Abbas & Catherine Locatelli, 2019. "Interdependence as a lever for national hybridization: The EU-Russia gas trade [L’hybridation des systèmes institutionnels nationaux dans l’interdépendance. Les échanges gaziers UE-Russie]," Post-Print hal-02472141, HAL.
    6. Zhao, Ruijia & Song, Yunting & Wang, Haoze & Xie, Xinlian, 2022. "Bi-objective optimisation model and its exact solution method of profit and market share of novel repair-and-support ships based on game theory," Omega, Elsevier, vol. 113(C).
    7. Locatelli, C. & Abbas, M., 2019. "Interdépendance complexe et hybridation des modèles institutionnels nationaux : le cas des relations énergétique UE-Russie," Working Papers 2019-02, Grenoble Applied Economics Laboratory (GAEL).
    8. Yang, Zaifu & Zhang, Rong & Zhang, Zongyi, 2016. "An exploration of a strategic competition model for the European Union natural gas market," Energy Economics, Elsevier, vol. 57(C), pages 236-242.
    9. 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.
    10. Sadek Boussena & Catherine Locatelli, 2017. "Gazprom and the complexity of the EU gas market: a strategy to define," Post-Print hal-01618494, HAL.
    11. Brandão, António & Soares, Isabel & Sarmento, Paula & Resende, Joana & Pinho, Joana, 2014. "Regulating international gas transport: Welfare effects of postage stamp and entry–exit systems," Energy, Elsevier, vol. 69(C), pages 86-95.
    12. Anis Hoayek & Hassan Hamie & Hans Auer, 2020. "Modeling the Price Stability and Predictability of Post Liberalized Gas Markets Using the Theory of Information," Energies, MDPI, vol. 13(11), pages 1-20, June.
    13. Boussena, S. & Locatelli, C., 2017. "Gazprom and the complexity of the EU gas market: A strategy to define," Working Papers 2017-09, Grenoble Applied Economics Laboratory (GAEL).
    14. Locatelli, C., 2018. "La confrontation des systèmes institutionnels nationaux dans l'interdépendance : les échanges gaziers UE-Russie," Working Papers 2018-03, Grenoble Applied Economics Laboratory (GAEL).
    15. Zaifu Yang & Rong Zhang & Zongyi Zhang, 2013. "Revisiting Jansen et al.'s Modified Cournot Model of the European Union Natural Gas Market," Discussion Papers 13/12, Department of Economics, University of York.
    16. Hassan Hamie & Anis Hoayek & Hans Auer, 2020. "Modeling Post-Liberalized European Gas Market Concentration—A Game Theory Perspective," Forecasting, MDPI, vol. 3(1), pages 1-16, December.
    17. Catherine Locatelli & Mehdi Abbas, 2019. "Interdépendance complexe et hybridation des modèles institutionnels nationaux : le cas des relations énergétiques UE-Russie," Working Papers hal-02100098, HAL.

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