Theoretical results for gas market equilibrium modeling with application to Brazil

Steven A. Gabriel (), Dominic C. Flocco (), Filipe Ferreira Mazzini (), David Sotelo (), Kamaiaji de Souza Castor () and Mario Levorato ()
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Steven A. Gabriel: University of Maryland
Dominic C. Flocco: University of Maryland
Filipe Ferreira Mazzini: Petrobras
David Sotelo: Petrobras
Kamaiaji de Souza Castor: Petrobras
Mario Levorato: Petrobras

Computational Management Science, 2025, vol. 22, issue 1, No 2, 48 pages

Abstract: Abstract In this paper, we present an abstract view of natural gas markets to offer a theoretical discussion on the existence and uniqueness of equilibrium solutions. In the abstract model, each player solves a separate profit-maximization optimization problem, the first-order optimality conditions of which can be concatenated together along with market-clearing conditions to give rise to a mixed complementarity problem. The equilibrium-based approach features a general framework that allows for the analysis of a convex combination of price-taking and price-making strategies for producers with a particular Cournot coefficient. As a new motivation for such an analysis, we apply the model to a gas market in transition as is the case in Brazil, which has undergone significant regulatory changes aimed at making it more open and competitive. By demonstrating a sensitivity analysis of market competition on an illustrative Brazilian gas network, we offer new insights to competitive natural gas market modeling.

Keywords: Equilibrium modeling; Optimization; Complementarity; Natural gas; Energy (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10287-024-00527-w

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