An Exploration of a Strategic Competition Model for the European Union Natural Gas Market

Zaifu Yang, Rong Zhang and Zongyi Zhang

Discussion Papers from Department of Economics, University of York

Abstract: Following Jansen et al. (2012), we examine an unconventional Cournot model of the European Union natural gas market with three major suppliers Russian Gazprom, Norwegian Statoil, and Algerian Sonatrach. To reect Russia's other strategic consideration besides profit, we incorporate a relative market share into Gazprom's objective function. We prove that when Gazprom pursues the control of market share along with profit, it will be good news for consumers but bad news for its pure profit maximising rivals. We further show that by seeking a proper market share, Gazprom can achieve the same profit of a Stackelberg leader in a simultaneous move model as in the standard sequential move leader-follower model. Compared with Jansen et al.'s, our approach makes the analysis considerably simpler and more transparent.

Keywords: Natural gas market; Cournot model; Stackelberg leader's advantage; Non-profit incentive; Relative market share; European Union (search for similar items in EconPapers)
JEL-codes: C62 C72 L13 L95 Q41 (search for similar items in EconPapers)
Date: 2016-05
New Economics Papers: this item is included in nep-cis, nep-com, nep-ene, nep-pr~ and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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