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On a tractable single-level reformulation of a multilevel model of the European entry-exit gas market with market power

Author

Listed:
  • Veronika Grimm

    (University of Technology Nuremberg (UTN))

  • Julia Grübel

    (University of Technology Nuremberg (UTN))

  • Martin Schmidt

    (Trier University)

  • Alexandra Schwartz

    (Technische Universität Dresden)

  • Ann-Kathrin Wiertz

    (Friedrich-Alexander-Universität Erlangen-Nürnberg)

  • Gregor Zöttl

    (Friedrich-Alexander-Universität Erlangen-Nürnberg)

Abstract

We propose a framework that allows to quantitatively analyze the interplay of the different agents involved in gas trade and transport in the context of the European entry-exit system. Previous contributions have focused on the case of perfectly competitive buyers and sellers of gas, which allows to replace the respective market equilibrium problem by a single welfare maximization problem. Our novel framework considers the mathematically more challenging case of a monopolistic and thus strategic gas seller. In this framework, the objective functions of the gas sellers and buyers cannot be aggregated into a common objective function, which is why a multilevel formulation is necessary to accurately capture the sequential nature of the decisions taken. For this setup, we derive sufficient conditions that allow for reformulating the challenging four-level model as a computationally tractable single-level reformulation. We prove the correctness of this reformulation and use it for solving several test instances to illustrate the applicability of our approach.

Suggested Citation

  • Veronika Grimm & Julia Grübel & Martin Schmidt & Alexandra Schwartz & Ann-Kathrin Wiertz & Gregor Zöttl, 2025. "On a tractable single-level reformulation of a multilevel model of the European entry-exit gas market with market power," Journal of Global Optimization, Springer, vol. 91(4), pages 953-985, April.
    • Handle: RePEc:spr:jglopt:v:91:y:2025:i:4:d:10.1007_s10898-025-01475-8
    DOI: 10.1007/s10898-025-01475-8
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