Bargaining Power and Value Sharing in Distribution Networks: a Cooperative Game Theory Approach
This paper illustrates a methodology for analyzing bargaining games on network markets, by means of numerical models that can be calibrated with real data. Economic incentives to join or to expand a network depend on how the network surplus is being distributed, which in turn depends on a variety of factors: position of each agent (e.g., a country) in a specific network, its reliability in the cooperation scheme (e.g., geo-political stability), existence of market distortions and availability of outside options (e.g., alternative energy sources). This study is aimed at presenting a game theory methodology that can be applied to real world cases, having the potential to shed light on several political economy issues. The methodology is presented and illustrated with application to a fictitious network structure. The method is based on a two-stage pro- cess: first, a network optimization model is used to generate payoff values under different coalitions and network structures; a second model is subsequently employed to identify cooperative game solutions. Any change in the network structure entails both a variation in the overall welfare level and in the distribution of surplus among agents, as it affects their relative bargaining power. Therefore, expected costs and benefits, at the aggregate as well as at the individual level, can be compared to assess the economic viability of any investment in network infrastructure. A number of model variants and extensions are also considered: changing demand, exogenous instability factors, market distortions, externalities and outside options.
|Date of creation:||2014|
|Date of revision:|
|Contact details of provider:|| Postal: Cannaregio, S. Giobbe no 873 , 30121 Venezia|
Web page: http://www.unive.it/dip.economia
More information through EDIRC
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.:
- Franz Hubert & Onur Cobanli, 2012.
FIW Working Paper series
- Onur Cobanli & Prof. Franz Hubert, 2012. "Pipeline Power," EcoMod2012 4448, EcoMod.
- Franz Hubert & Onur Cobanli, 2012. "Pipeline Power," Koç University-TUSIAD Economic Research Forum Working Papers 1224, Koc University-TUSIAD Economic Research Forum.
- Cobanli, Onur & Hubert, Franz, 2014. "Pipeline Power: A Case Study of Strategic Network Investments," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100596, Verein für Socialpolitik / German Economic Association.
- Hubert, Franz & Ikonnikova, Svetlana, 2009.
"Investment Options and Bargaining Power the Eurasian Supply Chain for Natural Gas,"
17854, University Library of Munich, Germany.
- 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, 03.
- Orlova, Ekaterina & Hubert, Franz, 2014. "Network Access and Market Power," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100474, Verein für Socialpolitik / German Economic Association.
- Stefano Moretti & Fioravante Patrone, 2008. "Transversality of the Shapley value," TOP- An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 16(1), pages 1-41, July.
- Stefano Moretti & Fioravante Patrone, 2008. "Rejoinder on: Transversality of the Shapley value," TOP- An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 16(1), pages 60-61, July.
- Matthew O. Jackson, 2003.
"Allocation Rules for Network Games,"
1160, California Institute of Technology, Division of the Humanities and Social Sciences.
When requesting a correction, please mention this item's handle: RePEc:ven:wpaper:2014:02. 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: (Geraldine Ludbrook)
If references are entirely missing, you can add them using this form.