Reinforcing buyer power: Trade quotas and supply diversification in the EU natural gas market

Gijsbert Zwart and Svetlana Ikonnikova ()

No 147, CPB Discussion Paper from CPB Netherlands Bureau for Economic Policy Analysis

Abstract: Can regulation help to increase domestic buyers’ countervailing power against foreign sellers? The question is paricularly relevant for the EU natural gas market. We use the Shapley value to describe the distribution of the trade surplus and market power in a bilateral oligopoly with concentrated domestic buyers and concentrated foreign sellers. With the EU natural gas market in mind, we find that buyers can benefit from bilateral but not from aggregate trade restrictions. Those who invest in supply diversification gain, with other buyers enjoying positive externalities; sellers lose profits and power. Thus we provide a rationale for the current EU support for importers’ investment plans.

JEL-codes: J51 (search for similar items in EconPapers)
Date: 2010-04
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Citations: View citations in EconPapers (2)

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