Lignite price negotiation between opencast mine and power plant as a two-stage, two-person, cooperative, non-zero sum game

Leszek Jurdziak ()

MPRA Paper from University Library of Munich, Germany

Abstract: Based on the simple model of the deposit the methodology of finding the optimal solution for bilateral monopoly (BM) of lignite mine and power plant is shown taking into account pit optimisation. It is proposed to treat lignite price negotiation as a kind of game. In the first stage (cooperative) both sides should select the ultimate pit maximising joint profits of BM and in the second one (competitive) the agreement should be achieved regarding profit division. This can be realised through side payments or by establishing the lignite transfer price. Lack of cooperation and opportunism can lead to the suboptimal solution – excavation of the smaller pit. Due to information asymmetry realisation of the optimal solution is more probably in vertically integrated firms. Dynamic adjustments of LOM BM plan to short-term changes of energy market using optimisation, BM model, game theory and their valuation as real options is the new direction of further re-search.

Keywords: bilateral monopoly; co-operative game; price negotiation; non-zero sum game; Pareto optimal solution; lignite price; power plant; lignite mine; pit optimisation; optimal ultimate pit; pit phases (search for similar items in EconPapers)
JEL-codes: C71 C78 D24 D43 D74 D82 D86 L11 L13 L14 L22 L72 L94 Q31 (search for similar items in EconPapers)
Date: 2006-09-24, Revised 2006-09-24
New Economics Papers: this item is included in nep-com, nep-ene and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Proceedings of the 8th International Symposium Continuous Surface Mining Department of Mining Engineering III, RWTH Aachen University.ISBN 3(2006): pp. 469-476

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