Assessing market structures in resource markets — An empirical analysis of the market for metallurgical coal using various equilibrium models

Stefan Lorenczik and Timo Panke

Energy Economics, 2016, vol. 59, issue C, 179-187

Abstract: The prevalent market structures found in many resource markets consist of high concentration on the supply side and low demand elasticity. Market results are therefore frequently assumed to be an outcome of strategic interaction between producers. Common models to investigate the market outcomes and underlying market structures are games representing competitive markets, strategic Cournot competition and Stackelberg structures that take into account a dominant player acting first followed by one or more players. We add to the literature by expanding the application of mathematical models and applying an Equilibrium Problem with Equilibrium Constraints (EPEC), which is used to model multi-leader–follower games, to a spatial market. Using our model, we investigate the prevalent market setting in the international market for metallurgical coal between 2008 and 2010, whose market characteristics provide arguments for a wide variety of market structures. Using different statistical measures to compare model results with actual market outcomes, we find that two previously neglected settings perform best: First, a setting in which the four largest metallurgical coal exporting firms compete against each other as Stackelberg leaders, while the remainders act as Cournot followers. Second, a setting with BHPB acting as sole Stackelberg leader.

Keywords: Applied industrial organisation; Stackelberg games (MPEC); Multi-leader–follower games (EPEC); Cournot oligopolies (MCP); Resource markets (search for similar items in EconPapers)
JEL-codes: C61 D43 L71 Q31 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:59:y:2016:i:c:p:179-187

DOI: 10.1016/j.eneco.2016.07.007

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