Modelling transfer profits as externalities in a cooperative game-theoretic model of natural gas networks

Dávid Csercsik, Franz Hubert (), Balázs Sziklai and László Kóczy ()
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Franz Hubert: School of Business and Economics Humboldt-Universität zu Berlin, Germany

No 1904, CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies

Abstract: Existing cooperative game theoretic studies of bargaining power in gas pipeline systems are based on the so called characteristic function form (CFF). This approach is potentially misleading if some pipelines fall under regulated third party access (TPA). TPA, which is by now the norm in the EU, obliges the owner of a pipeline to transport gas for others, provided they pay a regulated transport fee. From a game theoretic perspective, this institutional setting creates so called "externalities", the description of which requires partition function form (PFF) games. In this paper we propose a method to compute payoffs, reflecting the power structure, for a pipeline system with regulated TPA. The method is based on an iterative flow mechanism to determine gas flows and transport fees for individual players and uses the recursive core and the minimal claim function to convert the PPF game back into a CFF game, which can be solved by standard methods. We illustrate the approach with a simple stylized numerical example of the gas network in Central Eastern Europe with a focus on Ukraine’s power index as a major transit country.

Keywords: externalities; networks; natural gas; cooperative game theory; recursive core (search for similar items in EconPapers)
JEL-codes: C61 C71 D86 L14 Q40 Q48 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2019-02
New Economics Papers: this item is included in nep-ene and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Modeling transfer profits as externalities in a cooperative game-theoretic model of natural gas networks (2019)
Working Paper: Modelling transfer profits as externalities in a cooperative game-theoretic model of natural gas networks (2019)
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