DIW
BERLIN
Aus den Veroffentlichungen des DIW Berlin
Claudia Salim
Access Price Regulation and Price Discrimination in Intermediate Goods
Markets
We consider a model of a monopolistic network operator who sequentially offers two-parted
access charges to symmetric downstream firms. We are particularly interested in analyzing an
alternative to current regulatory practice of prescribing access. In particular, we look at the pos-
sibility of restraining the input monopolist’s market power by endowing downstream firms with
a regulatory option: In case they disagree with the contracts proposed to them, downstream
firms can claim a regulated access price. It turns out that this form of regulation may prevent
foreclosure even though allowing for price discrimination in the intermediary market. It proves
itself more beneficial to welfare than the current practice of prescribing access prices above
marginal cost. Interestingly, even though one expects discrimination against the first mover,
non-discriminatory input prices below cost can occur when the monopolist faces the alternative
of a rather strictly cost-oriented regulated access price. Non-discrimination rules will either not
become effective or result in less optimal price levels.
Discussion Paper No. 731
October 2007
Ruud Egging, Steven A. Gabriel, Franziska Holz and Jifang Zhuang
A Complementarity Model for the European Natural Gas Market
In this paper, we present a detailed and comprehensive complementarity model for comput-
ing market equilibrium values in the European natural gas system. Market players include
producers and their marketing arms which we call “transmitters”, pipeline and storage opera-
tors, marketers, LNG liquefiers, regasifiers, tankers, and three end-use consumption sectors. The
economic behavior of producers, transmitters, pipeline and storage operators, liquefiers and
regasifiers is modeled via optimization problems whose Karush-Kuhn-Tucker (KKT) optimality
conditions in combination with market-clearing conditions form the complementarity system.
The LNG tankers, marketers and consumption sectors are modeled implicitly via appropriate
cost functions, aggregate demand curves, and ex-post calculations, respectively. The model is
run on several case studies that highlight its capabilities, including a simulation of a disruption
of Russian supplies via Ukraine.
Discussion Paper No. 732
October 2007
662
Wochenbericht des DIW Berlin Nr. 44/2007
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