Legal and ownership unbundling in the Turkish natural gas market: A comparative analysis

Yunus Emre Gürler*, Sinan Ertemel, Matthias Finger, Muzaffer Eroğlu

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

This study introduces a theoretical framework for the Turkish natural gas market based on the principles of game theory and industrial organization. It investigates the effects of the legal and ownership unbundling on consumer surplus, social welfare, and competition. The model considers a mixed oligopoly with a transmission system operator (TSO), a state-owned incumbent, and a private firm. The state-owned incumbent is assumed to maximize consumer surplus and its own profit, while the private firm is assumed to be profit-maximizing. Additionally, the state-owned incumbent is assumed to be less efficient than the private firm. The game consists of three stages. In the first two stages, the state-owned incumbent and the private firm sequentially choose contract sizes in the upstream market. In the last stage, a contract size-restricted Cournot game is played. The findings of the study suggest that legal unbundling appears to offer greater advantages for consumer surplus and social welfare compared to ownership unbundling, particularly when considering key factors such as third-party access, non-tariff discrimination, and import liberalization. The results indicate that adopting the role of a Stackelberg follower by the state-owned incumbent in the upstream market is advantageous in terms of consumer surplus, social welfare, and competition under both unbundling approaches.

Original languageEnglish
Pages (from-to)19-42
Number of pages24
JournalCompetition and Regulation in Network Industries
Volume25
Issue number1
DOIs
Publication statusPublished - Mar 2024

Bibliographical note

Publisher Copyright:
© The Author(s) 2024.

Keywords

  • Legal unbundling
  • consumer surplus
  • contract size
  • market equilibrium
  • mixed oligopoly
  • natural gas market
  • ownership unbundling

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