Evaluating the Stability of the Oil and Gas Exploration and Production Regulatory Framework in Brazil

Abstract

This paper proposes to use game theory and equilibrium solution concept approaches to model and evaluate the stability of the oil and gas E&P regulatory framework in Brazil. We initially modeled the oil and gas E&P market as a non-cooperative multicriteria game and then applied the solution concepts presented in the GMCR methodology for evaluating the stability of the modeled game. There are indications that the logic behind the modeled game of choosing an adequate regulatory regime for the Brazilian oil and gas E&P market is similar to the classical game of Battle of the Sexes. Following the logic of this game, it is suggested that only in the presence of strong guarantees that the eventual sacrifice of players’ payoffs in the short or medium term will be compensated in the future, the regulatory framework of the oil and gas E&P market in Brazil can be considered stable.