Multiplicity of equilibria in conjectural variations models of natural gas markets

DOI10.1016/J.EJOR.2016.01.032zbMATH Open1346.91138arXiv1510.04473OpenAlexW2265653484MaRDI QIDQ322952FDOQ322952

Rudolf M. Füchslin, Pius Krütli, Tobias Baltensperger, John Lygeros

Publication date: 7 October 2016

Published in: European Journal of Operational Research (Search for Journal in Brave)

Abstract: Spatial partial equilibrium models incorporating conjectural variations are widely used to analyze the development of oligopolistic multi-agent markets, such as international energy and raw material markets. Although this model type can produce multiple equilibria under commonly used assumptions, to the best of our knowledge, the consequences for the interpretation of the model results have not yet been explored in detail. To this end, we derive a linear complementarity model for the gas market and discuss under which assumptions on the model structure a component of the solution is unique. In particular, we find that the gas flow between a trader and a consumer is unique whenever the trader is modeled to exert market power in the consumer's market. We demonstrate our findings by computing the extreme points of the polyhedral solution space and show that erroneous conclusions could be drawn whenever only one (arbitrary) point in the solution space is picked for interpretation. Furthermore, we discuss whether economically meaningful parameter value changes exist which would enforce uniqueness in all components of the solution.

Full work available at URL: https://arxiv.org/abs/1510.04473

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zbMATH Keywords

OR in energyconjectural variationsexistence and uniqueness of solutionslinear complementarity programnatural gas market

Mathematics Subject Classification ID

Economic models of real-world systems (e.g., electricity markets, etc.) (91B74) Complementarity and equilibrium problems and variational inequalities (finite dimensions) (aspects of mathematical programming) (90C33) General equilibrium theory (91B50)

Cites Work

• Title not available (Why is that?)
• A Mixed Complementarity-Based Equilibrium Model of Natural Gas Markets
• Benders decomposition for multi-stage stochastic mixed complementarity problems -- applied to a global natural gas market model
• Solving stochastic complementarity problems in energy market modeling using scenario reduction
• Endogenous production capacity investment in natural gas market equilibrium models
• Network Cournot Competition

Cited In (14)

• A Mixed Complementarity-Based Equilibrium Model of Natural Gas Markets
• Lumpy investment in regulated natural gas pipelines: an application of the theory of the second best
• Title not available (Why is that?)
• Solving oligopolistic equilibrium problems with convex optimization
• Equilibria in investment and spot electricity markets: a conjectural-variations approach
• Corrigendum to ``Benders decomposition for multi-stage stochastic mixed complementarity problems -- applied to a global natural gas market model
• Risk aversion in imperfect natural gas markets
• A multilevel model of the European entry-exit gas market
• Multiequilibrium game of timing and competition of gas pipeline projects
• A tractable multi-leader multi-follower peak-load-pricing model with strategic interaction
• The cost of decoupling trade and transport in the European entry-exit gas market with linear physics modeling
• Multicriteria analysis of natural gas destination in Brazil: An application of the TODIM method
• Strategic investment decisions in an oligopoly with a competitive fringe: an equilibrium problem with equilibrium constraints approach
• The role of demand response in mitigating market power: a quantitative analysis using a stochastic market equilibrium model

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