Conflict and cooperation with respect to European natural-gas regulations

Abstract

Significant economies of scale and scope in the European gas industry make many transmission and local distribution companies natural monopolies in the markets in which they operate. Often, this gives them a strong market power and they experience little competitive pressure. Hence public interventions into the functioning of the market, as seen under the initiatives taken by the European Commission, such as the “Gas Directive” occur. This paper discusses a game between the public authority and the transporters, where various levels of conflict and cooperation will influence how far regulations will go and how they will be designed.