Lignite price and split of profit negotiation in bilateral monopoly of lignite opencast mine and power plant

Leszek Jurdziak ()

MPRA Paper from University Library of Munich, Germany

Abstract: The newest outcome of bilateral monopoly (BM) of lignite opencast mine & power plant analysis have been discussed. The determinism of optimal solution maximising joint profits not only in quantity of lignite - the size and shape of the ultimate pit (characteristic to classical solution) but also in its price has been stressed. It is proposed to treat negotiation between power plant and mine as a cooperative, two-stage, two-person, non zero-sum game. In the first stage the ultimate pit maximising joint profits of BM should be chosen and in the second one, during bargaining, the split of profit ought to be decided together with choosing the transfer price of lignite. The level of lignite prices has been presented in the time of their control and confirmation (1996-2003) as well as their new profit sharing role in the period of their freely negotiation. The Nash bargaining solution has been proposed as a tool for equitable split of profit in BM due to its rational conditions. The application of this solution on example from the “Szczerców” deposit has been presented.

Keywords: bilateral monopoly; price negotiation; lignite mine; lignite power plant; pit optimisation; cooperative game; bargaining; profit division; transfere price; Nash bargaining solution; lignite deposit (search for similar items in EconPapers)
JEL-codes: C7 C71 C72 C78 D4 D43 D86 L0 L10 L13 L14 L22 L42 L94 Q31 Q32 Q41 R32 (search for similar items in EconPapers)
Date: 2006, Revised 2007-03-20
New Economics Papers: this item is included in nep-ene
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Published in Proceedings of the Fifteenth International Symposium on Mine Planning and Equipment Selection MPES’06 (2006): pp. 32-37

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