Revisiting Jansen et al.'s Modified Cournot Model of the European Union Natural Gas Market

Zaifu Yang, Rong Zhang and Zongyi Zhang

Discussion Papers from Department of Economics, University of York

Abstract: In this paper we reconsider Jansen et al.'s (2012) Cournot model of the European Union natural gas market with three major suppliers Russian Gazprom, Norwegian Statoil, and Algerian Sonatrach. To reflect Russia’s geopolitical consideration, we incorporate a relative market share to Gazprom’s objective function. Compared with Jansen et al.’s use of standard market share, our study shows that the introduction of relative market share makes it not only possible to derive the same results in a more general environment, but also permits us to obtain clear-cut quantitative analysis results for equilibrium solution, consumer surplus, and social welfare. Our analysis also demonstrates for this modiï¬ ed Cournot model that by seeking a proper market share, Gazprom can achieve the same profits of a Stackelberg leader in a simultaneous move model as in the classical sequential move leader-follower model. When Gazprom pursues the control of market share besides proï¬ ts, it will be good news for the EU’s consumers but bad news for its rivals.

Keywords: Natural gas market; Cournot model; Stackelberg leader’s advantage; Nonproï¬ t incentives; Relative market share; European Union (search for similar items in EconPapers)
JEL-codes: C62 C72 L13 L95 Q41 (search for similar items in EconPapers)
Date: 2013-06
New Economics Papers: this item is included in nep-cis, nep-com and nep-ene
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