A modified Cournot model of the natural gas market in the European union: Mixed motives delegation in a politicized environment

With gazprom gaining prominence as the major supplier of natural gas in the european union, the european gas market becomes more politicized. We assume that gazprom's interest as a state monopolist is not only to maximize profit, but also to seek market power, presumably because this contributes to the geopolitical power of russia at large. We introduce a modeling tool, so-called strategic delegation games, to analyze the implications of gazprom's operation in the eu. By way of illustration, we model the case where gazprom competes against two profit-maximizing rivals: algerian sonatrach and norwegian statoil. We prove that if gazprom serves any of a comprehensive type of nonprofit objectives, the outcome is beneficial for the eu's consumers, as gazprom's behavior shifts volumes up and brings prices down.