Investment in transport capacity and regulation of regional monopolies in natural gas commodity markets

Farid Gasmi () and Juan Oviedo ()

No 10074, Documentos de Trabajo from Universidad del Rosario

Abstract: This paper develops a model of the regulator-regulated firm relationship in a regional natural gas commodity market which can be linked to a competitive market by a pipeline. We characterize normative policies under which the regulator, in addition to setting the level of the capacity of the pipeline, regulates the price of gas, under asymmetric information on the firm´s technology, and may (or may not) operate (two-way) transfers between consumers and the firm. We then focus on capacity and investigate how its level responds to the regulator´s taking account of the firm´s incentive compatibility constraints. The analysis yields some insights on the role that transport capacity investments may play as an instrument to improve the efficiency of geographically isolated markets.

Keywords: Natural gas; Regulation; Transport capacity. (search for similar items in EconPapers)
JEL-codes: L51 L95 (search for similar items in EconPapers)
Pages: 54
Date: 2012-10-29
New Economics Papers: this item is included in nep-cta, nep-ene, nep-reg and nep-tre
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Persistent link: https://EconPapers.repec.org/RePEc:col:000092:010074

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