Revisiting Jansen et al.’s Modified Cournot Model of the European Union Natural Gas Market
Revisiting Jansen et al.’s Modified Cournot Model of the European Union Natural Gas Market / Zaifu Yang, Rong Zhang and Zongyi Zhang. Heslington : University of York, 0213, 25 p. (Discussion Papers in Economics ; No. 13/12)
Authors’s abstract :
In this paper we reconsider Jansen e tal.’s (2012) Cournot model of the Euro- pean 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 useof 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 modified 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 profits, it will be good news for the EU’s consumers but bad news for its rivals.