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The impact of who decides the rules for network use: A 'common pool' analysis of the investment dynamics in different gas network regulatory frames

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  • Michelle Hallack
  • Miguel Vazquez

Abstract

The liberalization of the natural gas industry has been based on the idea that infrastructure may be used by different gas owners. Different players using the same resources can give raise to 'commons dilemmas', which are defined by a conflict between individual rationality and group rationality. To avoid 'commons' inefficiencies, solutions are to establish rules that constrain the players' use of the network. In order to manage efficiently these situations, 'common pool' agreements can be established either through external authority or by the users themselves. In gas industries both can be found in practice. Public gas regulators can play the role of external authority in some countries, whereas in some other, the infrastructure rules are designed and implemented by the users themselves through players' agreements. Based on a simple game theoretical model, we compare the economics properties of the 'EU common carriage' and the 'US contract carriage' systems in term of static and dynamic efficiency. Our analysis allows us to identify missing economic signals in the EU regulatory framework both for static and dynamic efficiency.

Suggested Citation

  • Michelle Hallack & Miguel Vazquez, 2012. "The impact of who decides the rules for network use: A 'common pool' analysis of the investment dynamics in different gas network regulatory frames," RSCAS Working Papers 2012/52, European University Institute.
  • Handle: RePEc:rsc:rsceui:2012/52
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    File URL: http://cadmus.eui.eu/bitstream/handle/1814/23928/RSCAS%20_2012_52.pdf?sequence=1
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    File URL: http://hdl.handle.net/1814/23928
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    References listed on IDEAS

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    1. Hubbard, R Glenn & Weiner, Robert J, 1991. "Efficient Contracting and Market Power: Evidence from the U.S. Natural Gas Industry," Journal of Law and Economics, University of Chicago Press, vol. 34(1), pages 25-67, April.
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    Cited by:

    1. Miguel Vazquez & Michelle Hallack, 2013. "Short-term allocation of gas networks in the EU and gas-electricity input foreclosure," RSCAS Working Papers 2013/41, European University Institute.
    2. Glachant, Jean-Michel & Hallack, Michelle & Vazquez, Miguel, 2014. "Gas network and market “à la Carte”: Identifying the fundamental choices," Utilities Policy, Elsevier, vol. 31(C), pages 238-245.
    3. Jean-Michel Glachant & Michelle Hallack & Miguel Vazquez, 2014. "Gas network and market diversity in the US, the EU and Australia: A story of network access rights," RSCAS Working Papers 2014/33, European University Institute.
    4. Miguel Vazquez & Michelle Hallack & Jean-Michel Glachant, 2013. "Gas Network and Market: à la carte?," RSCAS Working Papers 2013/73, European University Institute.
    5. Miguel Vazquez & Michelle Hallack, 2016. "Short-Term Allocation Of Gas Networks And Gas-Electricity Input Foreclosure," Anais do XLII Encontro Nacional de Economia [Proceedings of the 42ndd Brazilian Economics Meeting] 126, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].

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