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Lignite price and split of profit negotiation in bilateral monopoly of lignite opencast mine and power plant

Listed author(s):
  • Jurdziak, Leszek

The newest outcome of bilateral monopoly (BM) of lignite opencast mine & power plant analysis have been discussed. The determinism of optimal solution maximising joint profits not only in quantity of lignite - the size and shape of the ultimate pit (characteristic to classical solution) but also in its price has been stressed. It is proposed to treat negotiation between power plant and mine as a cooperative, two-stage, two-person, non zero-sum game. In the first stage the ultimate pit maximising joint profits of BM should be chosen and in the second one, during bargaining, the split of profit ought to be decided together with choosing the transfer price of lignite. The level of lignite prices has been presented in the time of their control and confirmation (1996-2003) as well as their new profit sharing role in the period of their freely negotiation. The Nash bargaining solution has been proposed as a tool for equitable split of profit in BM due to its rational conditions. The application of this solution on example from the “Szczerców” deposit has been presented.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 2466.

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Date of creation: 2006
Date of revision: 20 Mar 2007
Publication status: Published in Proceedings of the Fifteenth International Symposium on Mine Planning and Equipment Selection MPES’06 (2006): pp. 32-37
Handle: RePEc:pra:mprapa:2466
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  1. Blair, Roger D & Kaserman, David L, 1987. "A Note on Bilateral Monopoly and Formula Price Contracts," American Economic Review, American Economic Association, vol. 77(3), pages 460-463, June.
  2. Jurdziak, Leszek, 2006. "Schemat arbitrażowy Nasha, a podział zysków w bilateralnym monopolu kopalni węgla brunatnego i elektrowni. Cześć pierwsza – podstawy teoretyczne
    [Nash bargaining solution and the split of profit in
    ," MPRA Paper 4142, University Library of Munich, Germany, revised 17 Jan 2006.
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