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Lignite price and split of profit negotiation in bilateral monopoly of lignite opencast mine and power plant

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  • Jurdziak, Leszek

Abstract

The newest outcome of bilateral monopoly (BM) of lignite opencast mine & power plant analysis have been discussed. The determinism of optimal solution maximising joint profits not only in quantity of lignite - the size and shape of the ultimate pit (characteristic to classical solution) but also in its price has been stressed. It is proposed to treat negotiation between power plant and mine as a cooperative, two-stage, two-person, non zero-sum game. In the first stage the ultimate pit maximising joint profits of BM should be chosen and in the second one, during bargaining, the split of profit ought to be decided together with choosing the transfer price of lignite. The level of lignite prices has been presented in the time of their control and confirmation (1996-2003) as well as their new profit sharing role in the period of their freely negotiation. The Nash bargaining solution has been proposed as a tool for equitable split of profit in BM due to its rational conditions. The application of this solution on example from the “Szczerców” deposit has been presented.

Suggested Citation

  • Jurdziak, Leszek, 2006. "Lignite price and split of profit negotiation in bilateral monopoly of lignite opencast mine and power plant," MPRA Paper 2466, University Library of Munich, Germany, revised 20 Mar 2007.
    • Handle: RePEc:pra:mprapa:2466
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    References listed on IDEAS

    as
    1. Jurdziak, Leszek, 2006. "Schemat arbitrażowy Nasha, a podział zysków w bilateralnym monopolu kopalni węgla brunatnego i elektrowni. Cześć pierwsza – podstawy teoretyczne [Nash bargaining solution and the split of profit in," MPRA Paper 4142, University Library of Munich, Germany, revised 17 Jan 2006.
    2. Blair, Roger D & Kaserman, David L, 1987. "A Note on Bilateral Monopoly and Formula Price Contracts," American Economic Review, American Economic Association, vol. 77(3), pages 460-463, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    bilateral monopoly; price negotiation; lignite mine; lignite power plant; pit optimisation; cooperative game; bargaining; profit division; transfere price; Nash bargaining solution; lignite deposit;
    All these keywords.

    JEL classification:

    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • L0 - Industrial Organization - - General
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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