Imperfect competition in the international energy market: a computerized Nash-Cournot model
This paper describes the conceptual structure, properties, and solution approach of a computerized model of the international energy market. The model treats energy producers as players in a multistage, noncooperative game. The goal of each player (or cartel of players) is assumed to be maximization of discounted profit subject to technical, political, and resource constraints. The model calculates that collection of intertemporal extraction and price paths from which a player can unilaterally deviate only at a loss---the open-loop, Nash equilibrium. The model integrates the theory of exhaustible resources due to Hotelling and the theory of oligopoly due to Nash and Cournot. Although useful as a teaching device to illustrate theoretical results, its main function is to facilitate analysis of real-world resource problems. The model is flexible, allowing the user to specify not only cost, demand and reserve information but also assumptions about who belongs to what coalition. Two shortcomings deserve note. The strategies of players are restricted to time-dated (open-loop) paths. Also, lags cannot be accommodated in the current version. The restriction of the strategy space significantly increases tractability and will permit the incorporation of lags and other complications in the future. The model was built under government contract and is in the public domain.
|Date of creation:||Mar 1982|
|Date of revision:|
|Publication status:||Published in Operations Research 2.30(1982): pp. 252-280|
|Contact details of provider:|| Postal: |
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
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.:
- Salant, Stephen W, 1976. "Exhaustible Resources and Industrial Structure: A Nash-Cournot Approach to the World Oil Market," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 1079-93, October.
- Lewis, Tracy R & Schmalensee, Richard, 1980.
"On Oligopolistic Markets for Nonrenewable Natural Resources,"
The Quarterly Journal of Economics,
MIT Press, vol. 95(3), pages 475-91, November.
- Lewis, Tracy R. & Schmalensee, Richard., 1979. "On oligopolistic markets for nonrenewable natural resources," Working papers 1052-79., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Loury, Glenn C, 1986. "A Theory of 'Oil'igopoly: Cournot Equilibrium in Exhaustible Resource Markets with Fixed Supplies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(2), pages 285-301, June.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:12021. 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: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.