IDEAS home Printed from https://ideas.repec.org/p/has/discpr/1904.html
   My bibliography  Save this paper

Modelling transfer profits as externalities in a cooperative game-theoretic model of natural gas networks

Author

Listed:
  • David Csercsik

    (Faculty of Information Technology and Bionics, Pázmány Péter Catholic University)

  • Franz Hubert

    (School of Business and Economics Humboldt-Universität zu Berlin, Germany)

  • Balazs R. Sziklai

    (Centre for Economic and Regional Studies Hungarian Academy of Sciences, and Faculty of Economics, Corvinus University Budapest)

  • Laszlo A. Koczy

    (Centre for Economic and Regional Studies Hungarian Academy of Sciences, and Faculty of Economic and Social Sciences, Budapest University of Technology and Economics)

Abstract

Existing cooperative game theoretic studies of bargaining power in gas pipeline systems are based on the so called characteristic function form (CFF). This approach is potentially misleading if some pipelines fall under regulated third party access (TPA). TPA, which is by now the norm in the EU, obliges the owner of a pipeline to transport gas for others, provided they pay a regulated transport fee. From a game theoretic perspective, this institutional setting creates so called "externalities", the description of which requires partition function form (PFF) games. In this paper we propose a method to compute payoffs, reflecting the power structure, for a pipeline system with regulated TPA. The method is based on an iterative flow mechanism to determine gas flows and transport fees for individual players and uses the recursive core and the minimal claim function to convert the PPF game back into a CFF game, which can be solved by standard methods. We illustrate the approach with a simple stylized numerical example of the gas network in Central Eastern Europe with a focus on Ukraine’s power index as a major transit country.

Suggested Citation

  • David Csercsik & Franz Hubert & Balazs R. Sziklai & Laszlo A. Koczy, 2019. "Modelling transfer profits as externalities in a cooperative game-theoretic model of natural gas networks," CERS-IE WORKING PAPERS 1904, Institute of Economics, Centre for Economic and Regional Studies.
  • Handle: RePEc:has:discpr:1904
    as

    Download full text from publisher

    File URL: http://www.mtakti.hu/wp-content/uploads/2019/03/MTDP1904.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Parkash Chander, 2007. "The gamma-core and coalition formation," International Journal of Game Theory, Springer;Game Theory Society, vol. 35(4), pages 539-556, April.
    2. Gabriel, Steven A. & Zhuang, Jifang & Kiet, Supat, 2005. "A large-scale linear complementarity model of the North American natural gas market," Energy Economics, Elsevier, vol. 27(4), pages 639-665, July.
    3. Roberto Roson & Franz Hubert, 2015. "Bargaining Power and Value Sharing in Distribution Networks: A Cooperative Game Theory Approach," Networks and Spatial Economics, Springer, vol. 15(1), pages 71-87, March.
    4. Daniel De Wolf & Yves Smeers, 1997. "A Stochastic Version of a Stackelberg-Nash-Cournot Equilibrium Model," Management Science, INFORMS, vol. 43(2), pages 190-197, February.
    5. Ibrahim Abada & Steven Gabriel & Vincent Briat & Olivier Massol, 2013. "A Generalized Nash–Cournot Model for the Northwestern European Natural Gas Markets with a Fuel Substitution Demand Function: The GaMMES Model," Networks and Spatial Economics, Springer, vol. 13(1), pages 1-42, March.
    6. McQuillin, Ben, 2009. "The extended and generalized Shapley value: Simultaneous consideration of coalitional externalities and coalitional structure," Journal of Economic Theory, Elsevier, vol. 144(2), pages 696-721, March.
    7. Helga Habis & David Csercsik, 2012. "Cooperation with Externalities and Uncertainty," CERS-IE WORKING PAPERS 1229, Institute of Economics, Centre for Economic and Regional Studies.
    8. 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.
    9. R. M. Thrall & W. F. Lucas, 1963. "N‐person games in partition function form," Naval Research Logistics Quarterly, John Wiley & Sons, vol. 10(1), pages 281-298, March.
    10. SCHMEIDLER, David, 1969. "The nucleolus of a characteristic function game," LIDAM Reprints CORE 44, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    11. Irina Suleymanova & Franz Hubert, 2007. "Strategic Investment in International Gas-Transport Systems: A Dynamic Analysis of the Hold-up Problem," Energy and Environmental Modeling 2007 24000059, EcoMod.
    12. De Wolf, D. & Smeers, Y., 1997. "A stochastic version of a Stackelberg-Nash-Cournot equilibrium model," LIDAM Reprints CORE 1257, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    13. Hubert, Franz & Orlova, Ekaterina, 2018. "Network access and market power," Energy Economics, Elsevier, vol. 76(C), pages 170-185.
    14. Balazs Sziklai & Laszlo A. Koczy & David Csercsik, 2018. "The geopolitical impact of Nord Stream 2," CERS-IE WORKING PAPERS 1821, Institute of Economics, Centre for Economic and Regional Studies.
    15. 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.
    16. Csaba Weiner, 2016. "Central and East European diversification under new gas market conditions," IWE Working Papers 221, Institute for World Economics - Centre for Economic and Regional Studies- Hungarian Academy of Sciences.
    17. Steven A. Gabriel & Supat Kiet & Jifang Zhuang, 2005. "A Mixed Complementarity-Based Equilibrium Model of Natural Gas Markets," Operations Research, INFORMS, vol. 53(5), pages 799-818, October.
    18. Cobanli, Onur, 2014. "Central Asian gas in Eurasian power game," Energy Policy, Elsevier, vol. 68(C), pages 348-370.
    19. Maroeska G. Boots, Fieke A.M. Rijkers and Benjamin F. Hobbs, 2004. "Trading in the Downstream European Gas Market: A Successive Oligopoly Approach," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 73-102.
    20. Breton, Michele & Zaccour, Georges, 2001. "Equilibria in an asymmetric duopoly facing a security constraint," Energy Economics, Elsevier, vol. 23(4), pages 457-475, July.
    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. Basso, Franco & Basso, Leonardo J. & Rönnqvist, Mikael & Weintraub, Andres, 2021. "Coalition formation in collaborative production and transportation with competing firms," European Journal of Operational Research, Elsevier, vol. 289(2), pages 569-581.
    2. Sziklai, Balázs R. & Kóczy, László Á. & Csercsik, Dávid, 2020. "The impact of Nord Stream 2 on the European gas market bargaining positions," Energy Policy, Elsevier, vol. 144(C).

    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. Sziklai, Balázs R. & Kóczy, László Á. & Csercsik, Dávid, 2020. "The impact of Nord Stream 2 on the European gas market bargaining positions," Energy Policy, Elsevier, vol. 144(C).
    2. Balazs Sziklai & Laszlo A. Koczy & David Csercsik, 2018. "The geopolitical impact of Nord Stream 2," CERS-IE WORKING PAPERS 1821, Institute of Economics, Centre for Economic and Regional Studies.
    3. Hubert, Franz & Orlova, Ekaterina, 2018. "Network access and market power," Energy Economics, Elsevier, vol. 76(C), pages 170-185.
    4. Schulte, Simon & Weiser, Florian, 2017. "Natural Gas Transits and Market Power - The Case of Turkey," EWI Working Papers 2017-6, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI), revised 15 Aug 2017.
    5. Chyong, C K. & Reiner, D & Aggarwal, D., 2021. "Market power and long-term gas contracts: the case of Gazprom in Central and Eastern European Gas Markets," Cambridge Working Papers in Economics 2144, Faculty of Economics, University of Cambridge.
    6. Steven A. Gabriel & Supat Kiet & Jifang Zhuang, 2005. "A Mixed Complementarity-Based Equilibrium Model of Natural Gas Markets," Operations Research, INFORMS, vol. 53(5), pages 799-818, October.
    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. Chyong, Chi Kong & Hobbs, Benjamin F., 2014. "Strategic Eurasian natural gas market model for energy security and policy analysis: Formulation and application to South Stream," Energy Economics, Elsevier, vol. 44(C), pages 198-211.
    9. Roberto Roson & Franz Hubert, 2015. "Bargaining Power and Value Sharing in Distribution Networks: A Cooperative Game Theory Approach," Networks and Spatial Economics, Springer, vol. 15(1), pages 71-87, March.
    10. 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.
    11. Roger A McCain, 2013. "Value Solutions in Cooperative Games," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 8528, August.
    12. Egging-Bratseth, Ruud & Baltensperger, Tobias & Tomasgard, Asgeir, 2020. "Solving oligopolistic equilibrium problems with convex optimization," European Journal of Operational Research, Elsevier, vol. 284(1), pages 44-52.
    13. László Á. Kóczy, 2018. "Partition Function Form Games," Theory and Decision Library C, Springer, number 978-3-319-69841-0, December.
    14. András Kiss, Adrienn Selei, and Borbála Takácsné Tóth, 2016. "A Top-Down Approach to Evaluating Cross-Border Natural Gas Infrastructure Projects in Europe," The Energy Journal, International Association for Energy Economics, vol. 0(Sustainab).
    15. Gasmi, Farid & Oviedo, Juan Daniel, 2010. "Investment in transport infrastructure, regulation, and gas-gas competition," Energy Economics, Elsevier, vol. 32(3), pages 726-736, May.
    16. Beard, Rodney & Mallawaarachchi, Thilak, 2011. "Are international environmental agreements stable ex-post?," MPRA Paper 34303, University Library of Munich, Germany.
    17. Feijoo, Felipe & Huppmann, Daniel & Sakiyama, Larissa & Siddiqui, Sauleh, 2016. "North American natural gas model: Impact of cross-border trade with Mexico," Energy, Elsevier, vol. 112(C), pages 1084-1095.
    18. GABRIEL, Steven & SMEERS, Yves, 2005. "Complementarity problems in restructured natural gas markets," LIDAM Discussion Papers CORE 2005037, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    19. Foster, John & Wagner, Liam & Liebman, Ariel, 2015. "Modelling the Electricity and Natural Gas Sectors for the Future Grid: Developing Co-Optimisation Platforms for Market Redesign," MPRA Paper 70114, University Library of Munich, Germany.
    20. Guo, Yingjian & Hawkes, Adam, 2018. "Simulating the game-theoretic market equilibrium and contract-driven investment in global gas trade using an agent-based method," Energy, Elsevier, vol. 160(C), pages 820-834.

    More about this item

    Keywords

    externalities; networks; natural gas; cooperative game theory; recursive core;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:has:discpr:1904. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/iehashu.html .

    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: Nora Horvath (email available below). General contact details of provider: https://edirc.repec.org/data/iehashu.html .

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.