A modified Cournot model of the natural gas market in the European Union: Mixed-motives delegation in a politicized environment

Thijs Jansen*, Arie van Lier, Arjen van Witteloostuijn, Tim Boon von Ochssée

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

With Gazprom gaining prominence as the major supplier of natural gas in the European Union, the European gas market becomes more politicized. We assume that Gazprom's interest as a state monopolist is not only to maximize profit, but also to seek market power, presumably because this contributes to the geopolitical power of Russia at large. We introduce a modeling tool, so-called strategic delegation games, to analyze the implications of Gazprom's operation in the EU. By way of illustration, we model the case where Gazprom competes against two profit-maximizing rivals: Algerian Sonatrach and Norwegian Statoil. We prove that if Gazprom serves any of a comprehensive type of nonprofit objectives, the outcome is beneficial for the EU's consumers, as Gazprom's behavior shifts volumes up and brings prices down.

Original languageEnglish
Pages (from-to)280-285
Number of pages6
JournalEnergy Policy
Volume41
DOIs
Publication statusPublished - 1 Feb 2012
Externally publishedYes

Keywords

  • Cournot duopoly
  • Natural gas market
  • Nonprofit incentives

Fingerprint

Dive into the research topics of 'A modified Cournot model of the natural gas market in the European Union: Mixed-motives delegation in a politicized environment'. Together they form a unique fingerprint.

Cite this