This paper analyzes how the supply side of the Western European natural gas market may react if the demand side becomes competitive. We show-using a numerical model of the Western European natural gas market-that once the demand side of the market is liberalized, each gasproducing country has an incentive to break up its gas sellers. The model therefore suggests that there may be numerous producers in a liberalized natural gas market. Hence, in a liberalized market consumers will not be exploited by suppliers.
Commission of the European Communities (1988). The internal energy market. COM (88) 238 Final, Brussels, 2 May.
2.
Commission of the European Communities (1992). Completion of the internal market in electricity and gas. Brussels, 21 January.
3.
CorchonL. C.Gonzalez-MaestreM. (1992). “On the competitive effects of divisionalization,” Mimeo. University of Alicante.
4.
DixitA. K. (1984): “International trade policy for oligopolistic industries.” Economic Journal, Supplement, 94: 1-16.
5.
EatonJ.GrossmanG. M. (1986). “Optimal trade and industrial policy under oligopoly.” Quarterly Journal of Economics101: 383-406.
6.
FarrellJ.ShapiroC. (1990). “Horizontal mergers: An equilibrium analysis.” The American Economic Review80(1): 107-126.
7.
FudenbergD.TiroleJ. (1993). Game Theory. The MIT Press.
8.
GolombekR.GjelsvikE.RosendahlK.E. (1995). “Effects of Liberalizing the Natural Gas Markets in Western Europe.” The Energy Journal16 (1): 85-111.
9.
GolombekR.GjelsvikE.RosendahlK.E. (1996). “Increased competition on the supply side of the Western European natural gas market.” Working paper from Department of Economics, University of Oslo.
10.
HopperR. J. (1991). Natural Gas: Open Access: The Potential Economic Benefits to Consumers in EC Markets. Report to CEFIC European Chemical Industry Council. Brussels.
11.
Jensen Associates (1990). U.S. Open Access Gas Pipeline Transportation - A Model for Europe? Report to Ruhrgas. Jensen Associates, Inc. Boston.
12.
KlempererP. D.MeyerM. A. (1989). “Supply function equilibria in oligopoly under uncertainty.” Econometrica57(6): 1243-1277.
13.
PolaskyS. (1992). “Divide and conquer. On the profitability of forming independent rival divisions.” Economic Letters40: 365-371.
14.
RiisC. (1989). “Strategic wage contracts.” Journal of Economics50(2): 129-137.
15.
SalantS. W.SwitzerS.ReynoldsR. J. (1983). “Losses from horizontal merger: The effects of an exogenous change in industry structure on Cournot-Nash equilibrium.” The Quarterly Journal of EconomicsXCVIII (2): 185-199.
16.
SmithA.VenablesA. (1988). “Completing the internal market in the European community. Some industry simulations.” European Economic Review32: 1501-1525.
17.
StemJ. P. (1992). Third Party Access in European Gas Industries. Regulation-driven or market-led? The Royal Institute of International Affairs. London.
