A Game-Theoretic Analysis of Canada’s Entry for LNG Exports in the Asia-Pacific Market

Subhadip Ghosh and Shahidul Islam ()
Additional contact information
Subhadip Ghosh: Decision Sciences, School of Business, MacEwan University, Edmonton, AB T5J 4S2, Canada
Shahidul Islam: Department of Economics, MacEwan University, Edmonton, AB T5J 4S2, Canada

Commodities, 2023, vol. 2, issue 2, 1-19

Abstract: The import demand for energy resources, including liquefied natural gas (LNG), has been steadily increasing in the Asia-Pacific region. Australia, the Middle East (Qatar), the Russian Federation, and the U.S. are the major players who compete strategically to capture this ever-growing market for LNG. The objective of this paper is to examine the potential for Canada’s entry into this market as another LNG exporter and what impact that can have on the existing suppliers. Using a game-theoretic LNG export competition model, we explore the conditions under which Canada can make a profitable entry. We also investigate the effect of Canada’s entry on the profitability of the four incumbent exporters. Employing a multi-leader Stackelberg model, we found that Canada’s entry could be a Pareto superior outcome under certain conditions because it benefits all competing firms and consumers. Further, Canada’s entry into the LNG export market always helps the low-cost incumbent firms by increasing their output and profit. However, the high-cost incumbent firms’ output falls, while their profit may increase or decrease depending on the unit cost and market size parameters. With differential export costs between Canada and the U.S., the latter has an incentive to act strategically to affect the entrance of the former.

Keywords: Asia-Pacific; Canada; game theory; LNG export; oligopoly (search for similar items in EconPapers)
JEL-codes: C0 C1 C2 C3 C4 C5 C6 C7 C8 C9 D4 E3 E6 F0 F1 F3 F4 F5 F6 G1 O1 O5 Q1 Q2 Q4 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.mdpi.com/2813-2432/2/2/11/pdf (application/pdf)
https://www.mdpi.com/2813-2432/2/2/11/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jcommo:v:2:y:2023:i:2:p:11-187:d:1169551

Access Statistics for this article

Commodities is currently edited by Ms. Wendy Yu

More articles in Commodities from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().