Investment Options and Bargaining Power the Eurasian Supply Chain for Natural Gas

Franz Hubert and Svetlana Ikonnikova ()

MPRA Paper from University Library of Munich, Germany

Abstract: We use cooperative game theory to analyze how the architecture of the pipeline network determines the power structure in the supply chain for Russian gas. If the assessment is narrowly focused on the abilities to obstruct flows in the existing system, the main transit countries, Belarus and Ukraine, appear to be strong. If investment options are accounted for, however, Russia achieves clear dominance. We show that options to bypass one of the transit countries are of little strategic importance compared to Russia's direct access to its customers through the Baltic Sea. Comparing the results of our calibrated model with empirical evidence obtained from transit and import agreements we find that the Shapley value explains the power of major transit countries better than the core and the nucleolus.

Keywords: Bargaining Power; Supply Chain; Shapley Value; Gas Transport (search for similar items in EconPapers)
JEL-codes: C71 D43 F50 F51 (search for similar items in EconPapers)
Date: 2009-09
New Economics Papers: this item is included in nep-ene and nep-tra
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Citations: View citations in EconPapers (24)

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Related works:
Journal Article: INVESTMENT OPTIONS AND BARGAINING POWER: THE EURASIAN SUPPLY CHAIN FOR NATURAL GAS (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:17854

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