On a tractable single-level reformulation of a multilevel model of the European entry-exit gas market with market power
Grimm V, Grübel J, Schmidt M, Schwartz A, Wiertz AK, Zöttl G (2025)
Publication Language: English
Publication Type: Journal article
Publication year: 2025
Journal
Book Volume: 91
Pages Range: 953-985
Journal Issue: 4
DOI: 10.1007/s10898-025-01475-8
Abstract
We propose a framework that allows to quantitatively analyze the interplay of the different agents involved in gas trade and transport in the context of the European entry-exit system. Previous contributions have focused on the case of perfectly competitive buyers and sellers of gas, which allows to replace the respective market equilibrium problem by a single welfare maximization problem. Our novel framework considers the mathematically more challenging case of a monopolistic and thus strategic gas seller. In this framework, the objective functions of the gas sellers and buyers cannot be aggregated into a common objective function, which is why a multilevel formulation is necessary to accurately capture the sequential nature of the decisions taken. For this setup, we derive sufficient conditions that allow for reformulating the challenging four-level model as a computationally tractable single-level reformulation. We prove the correctness of this reformulation and use it for solving several test instances to illustrate the applicability of our approach.
Authors with CRIS profile
Ann-Kathrin Wiertz
Professur für Volkswirtschaftslehre
Karl Gregor Zöttl
Professur für Volkswirtschaftslehre
Involved external institutions
Technische Universität Nürnberg / University of Technology Nuremberg (UTN)
Germany (DE)
Universität Trier
Germany (DE)
Technische Universität Dresden
Germany (DE)
Germany (DE)
Universität Trier
Germany (DE)
Technische Universität Dresden
Germany (DE)
How to cite
APA:
Grimm, V., Grübel, J., Schmidt, M., Schwartz, A., Wiertz, A.-K., & Zöttl, G. (2025). On a tractable single-level reformulation of a multilevel model of the European entry-exit gas market with market power. Journal of Global Optimization, 91(4), 953-985. https://doi.org/10.1007/s10898-025-01475-8
MLA:
Grimm, Veronika, et al. "On a tractable single-level reformulation of a multilevel model of the European entry-exit gas market with market power." Journal of Global Optimization 91.4 (2025): 953-985.
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