Price discrimination and limits to arbitrage: An analysis of global LNG markets
نویسنده
چکیده
Gas prices around the world vary widely despite being connected by international trade of liquefied natural gas (LNG). Some industry observers argue that major exporters have acted irrationally by not arbitraging prices. This is also diffi cult to reconcile with a competitive model in which regional price differences exist solely because of transport costs. We show that a model which incorporates market power can rationalize observed prices and trade flows. We highlight how different features of the LNG market limit the ability and/or incentive of other players to engage in arbitrage, including constraints in LNG shipping. We also present some rough estimates of market power in short-term sales by Qatar (to Japan and the UK, respectively), and discuss the potential impact of US LNG exports.
منابع مشابه
Pricing of Natural Gas Feed stock Based on Financial Assessment of Small-Scale LNG Plants in Iran
Export of liquefied natural gas (LNG) is one of the basic needs of the Iranian oil, gas and petrochemical industry due to the severe sanctions conditions in Iran, restrictions on export of natural gas through pipelines and increased use of LNG in the energy basket of different countries. However, in recent years, despite some attempts to produce this strategic product, no concrete results have ...
متن کاملPerfect price discrimination with costless arbitrage
The ability of a monopoly seller to prevent resale is often presented as a necessary condition for first degree price discrimination. In this paper, we explore this claim and show that, even with costless arbitrage markets, price discrimination may continue to be both feasible and profit maximizing despite potential resale. With finite numbers of consumers, arbitrage markets may be ‘thin’, in t...
متن کاملMultimarket Contact, Price Discrimination and Consumer Welfare
This paper investigates the extent to which ...rms choose multimarket contact when there is no possibility of consumer or producer arbitrage across the relevant markets. The degree of multimarket contact is shown to be greater when ...rms o¤er distinctive products and when setup costs are low. Price discrimination increases multimarket contact, bene...tting consumers but harming ...rms. There a...
متن کاملOn the Role of Arbitrageurs in Rational Markets∗
Price discrepancies, although at odds with mainstream finance, are persistent phenomena in financial markets. These apparent mispricings lead to the presence of “arbitrageurs,” who aim to exploit the resulting profit opportunities, but whose role remains controversial. This article investigates the impact of the presence of arbitrageurs in rational financial markets. Arbitrage opportunities bet...
متن کاملAre Global Labor Markets Truly “Flat”? Global Frictions, Labor Arbitrage, and Reputation Signals in Online Markets
Visionaries conjecture that the world is becoming a level (“flat”) playing field due to the Internet that connects professional workers with employers anywhere around the world. To examine this “flat world” conjecture for global online labor markets for software development services, we analytically model and empirically examine the key factors that affect the dual aspects pricing of profession...
متن کامل