Take or Pay Contracts and Market Segmentation
This paper examines competition in the liberalized natural gas market. Each .firm has zero marginal cost core capacity, due to long term contracts with take or pay obligations, and additional capacity at higher marginal costs. The market is decentralized and the firms decide which customers to serve, competing then in prices. In equilibrium each .firm approaches a different segment of the market and sets the monopoly price, i.e. market segmentation. Antitrust ceilings do not prevent such an outcome while the separation of wholesale and retail activities and the creation of a wholesale market induces generalized competition and low margins in the retail segment.
|Date of creation:||2007|
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- repec:dau:papers:123456789/5372 is not listed on IDEAS
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- Marc Dudey, 1992. "Dynamic Edgeworth-Bertrand Competition," The Quarterly Journal of Economics, Oxford University Press, vol. 107(4), pages 1461-1477.
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- Maggi, Giovanni, 1996. "Strategic Trade Policies with Endogenous Mode of Competition," American Economic Review, American Economic Association, vol. 86(1), pages 237-258, March. Full references (including those not matched with items on IDEAS)
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