Study on Network Separation Strategy of Natural Monopoly IndustryBased on Game Theory——Taking Oil and Natural Gas Industry as an Example

Abstract

Abstract:

Under the current system, fair access into such natural monopoly industries as oil and natural gas is hardly achievable due to their vertically integrated operation mode. This has resulted in many problems, such as under-investment and lag in pipeline network construction, low transmission network utilization rates and high consumer prices. This paper uses Cournot Duopoly Model to analyze the impact of vertical integration reform on social welfare in China's oil and natural gas pipeline network. Five scenarios are designed to identify the effective path for the reform of natural monopoly industries in China. The results show that monopolistic behaviors of integrated enterprises will restrain the fair play in the market, force downstream enterprises to suffer higher production costs and impair consumer and social welfare. This problem can be effectively solved if long-distance pipeline network business is stripped off from those integrated enterprises and independent pipeline network companies are established separately. So doing will promote healthy competition, increase investment, reduce costs, improve efficiency and increase total social welfare.

Key words: Cournot duopoly, de-integration, pipeline network ownership/operation separation

Dong Jichang, Sha Siying, Li Xiuting, Wang Bing, Miao Jinyu. Study on Network Separation Strategy of Natural Monopoly IndustryBased on Game Theory——Taking Oil and Natural Gas Industry as an Example[J]. , 2019, 31(8): 49-58.

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