Investment in transport capacity and regulation of regional monopolies in natural gas commodity markets

Farid Gasmi and Juan Oviedo ()

No 10074, Documentos de Trabajo from Universidad del Rosario

Abstract: This paper develops a model of the regulator-regulated firm relationship in a regional natural gas commodity market which can be linked to a competitive market by a pipeline. We characterize normative policies under which the regulator, in addition to setting the level of the capacity of the pipeline, regulates the price of gas, under asymmetric information on the firm´s technology, and may (or may not) operate (two-way) transfers between consumers and the firm. We then focus on capacity and investigate how its level responds to the regulator´s taking account of the firm´s incentive compatibility constraints. The analysis yields some insights on the role that transport capacity investments may play as an instrument to improve the efficiency of geographically isolated markets.

Keywords: Natural gas; Regulation; Transport capacity. (search for similar items in EconPapers)
JEL-codes: L51 L95 (search for similar items in EconPapers)
Pages: 54
Date: 2012-10-29
New Economics Papers: this item is included in nep-cta, nep-ene, nep-reg and nep-tre
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Persistent link: https://EconPapers.repec.org/RePEc:col:000092:010074

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