Investment in transport capacity and regulation of regional monopolies in natural gas commodity markets
This paper develops a model of the regulator-regulated ﬁrm relationship in a regional natural gas commodity market which can be linked to a competitive market by a pipeline. We characterize normative policies under which the regulator, in addition to setting the level of the capacity of the pipeline, regulates the price of gas, under asymmetric information on the ﬁrm´s technology, and may (or may not) operate (two-way) transfers between consumers and the ﬁrm. We then focus on capacity and investigate how its level responds to the regulator´s taking account of the ﬁrm´s incentive compatibility constraints. The analysis yields some insights on the role that transport capacity investments may play as an instrument to improve the eﬃciency of geographically isolated markets.
|Date of creation:||29 Oct 2012|
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- Cremer, Helmuth & Gasmi, Farid & Laffont, Jean-Jacques, 2003. "Access to Pipelines in Competitive Gas Markets," Journal of Regulatory Economics, Springer, vol. 24(1), pages 5-33, July.
- Farid Gasmi & Juan Daniel Oviedo, 2012. "Controlling regional monopolies in the natural gas industry: the role of transport capacity," DOCUMENTOS DE TRABAJO 010073, UNIVERSIDAD DEL ROSARIO.
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