Analysis of the World Market for Steam Coal Using a Complementarity Model

Clemens Haftendorn and Franziska Holz

No 818, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: With its resource availability and the prospect of climate friendly technology, coal continues to play an important role in the global energy sector. We develop a complementarity model of the international market for steam coal. We want to analyze the level of competition in this market which is strategic for the importers' security of energy supply. In a spatial equilibrium framework, we assume the steam coal exporters to maximize their profits by choosing the optimal quantity to sell to each importing country. We compare two possible scenarios: perfect competition and Cournot competition. The results, especially the price levels, indicate that the Cournot model is not realistic, suggesting that the producing countries do not exert market power. However, the trade flows and prices observed in reality suggests that there is some form of market power with price discrimination, possibly following a Bertrand model in a spatial setting.

Keywords: Coal; energy; market structure; simulation model (search for similar items in EconPapers)
JEL-codes: C69 L11 L72 (search for similar items in EconPapers)
Pages: 18 p.
Date: 2008
New Economics Papers: this item is included in nep-com, nep-ene and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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