Evidence of Market Power in the Atlantic Steam Coal Market Using Oligopoly Models with a Competitive Fringe
Before 2004 South Africa was the dominant steam coal exporter to the European market. However a new market situation with rising global demand and prices makes room for a new entrant: Russia. The hypothesis investigated in this paper is that the three incumbent dominant firms located in South Africa and Colombia reacted to that new situation by exerting market power and withheld quantities from the market in 2004 and 2005. Three market structure scenarios of oligopoly with a competitive fringe are developed to investigate this hypothesis: a Stackelberg model with a cartel, a Stackelberg model with a Cournot-oligopoly as leader and a Nash-bargaining model. The model with a Cournot oligopoly as leader delivers the best reproduction of the actual market situation meaning that the dominant players exert market power in a non-cooperative way without profit sharing. Furthermore some methodological clarifications regarding the modeling of markets with dominant players and a competitive fringe are made. In particular we show that the use of mixed aggregated conjectural variations can lead to outcomes that are inconsistent with the actions of rational profit-maximizing players.
|Date of creation:||2012|
|Contact details of provider:|| Postal: Mohrenstraße 58, D-10117 Berlin|
Web page: http://www.diw.de/en
More information through EDIRC
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.:
- Victor DeMiguel & Huifu Xu, 2009. "A Stochastic Multiple-Leader Stackelberg Model: Analysis, Computation, and Application," Operations Research, INFORMS, vol. 57(5), pages 1220-1235, October.
- Egging, Ruud & Gabriel, Steven A. & Holz, Franziska & Zhuang, Jifang, 2008.
"A complementarity model for the European natural gas market,"
Elsevier, vol. 36(7), pages 2385-2414, July.
- Ruud Egging & Steven A. Gabriel & Franziska Holz & Jifang Zhuang, 2007. "A Complementarity Model for the European Natural Gas Market," Discussion Papers of DIW Berlin 732, DIW Berlin, German Institute for Economic Research.
- Andrew F. Daughety, 1985. "Reconsidering Cournot: The Cournot Equilibrium is Consistent," RAND Journal of Economics, The RAND Corporation, vol. 16(3), pages 368-379, Autumn.
- Yihsu Chen & Benjamin Hobbs & Sven Leyffer & Todd Munson, 2006. "Leader-Follower Equilibria for Electric Power and NO x Allowances Markets," Computational Management Science, Springer, vol. 3(4), pages 307-330, September.
- Ekawan, Rudianto & Duchene, Michel, 2006. "The evolution of hard coal trade in the Atlantic market," Energy Policy, Elsevier, vol. 34(13), pages 1487-1498, September. Full references (including those not matched with items on IDEAS)