Journal
ENERGY POLICY
Volume 41, Issue -, Pages 280-285Publisher
ELSEVIER SCI LTD
DOI: 10.1016/j.enpol.2011.10.047
Keywords
Natural gas market; Cournot duopoly; Nonprofit incentives
Funding
- Flemish Science Foundation (FWO)
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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. (C) 2011 Elsevier Ltd. All rights reserved.
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