STRATEGIC FLOWS · Strategic Analysis of Flow Networks

Strategic analysis of flow networks

The natural resources which require an infrastructure or geographical proximity for their use form a network when multiple users, countries or regions share the same source. Each link in such a network carries an amount of the resource from a source to a user. Users sharing the same source create negative externalities on each other. These characteristics are shared by all common property resources. Before studying a particular case (e.g. natural gas, water, fishery), we need a deeper insight on the functioning of flow networks. The goal of the project is to build a theoretical framework for the systematic analysis of flow networks. The project strategic analysis of flow networks concludes producing 1 publication and 4 working papers (3 has been submitted to academic journals and 1 to be submitted soon). - Although a great deal is known about a single common, it does not exist a theoretic model of multiple sources, as exemplified above. In Ilkiliç (2010a, forthcoming in Economic Theory), I answered the two basic questions surrounding a tragedy of commons. I calculated the equilibrium when the users exploit the sources freely and characterised the efficient allocation of resources. - To understand how the market for the natural gas functions, we need to go into the details of the network that connects suppliers with consumers. A structural analysis is required to understand the patterns of interaction and to quantify the influence that countries or regions have on each other. We need to understand how each link affects the countries that it connects and measure how much it changes the prices. We can ask how the addition of a new link changes the market and whether it would be profitable to construct it. Then we can see how a country (e.g. Russia) or a group of countries (e.g. the European Union (EU)) can improve their market power by coordinating their policies on infrastructure and consumption. In my working paper Ilkiliç (2010b, submitted), I analyse a model of Cournot competition with multiple markets and firms. A firm can supply only to those markets which it has a connection with. I solve for the Cournot equilibrium and study how a cartel would behave in such a market to find out how collusion of in such a networked market would affect firms and consumers over the whole network. Such an analysis can help us answer whether it might be feasible to have a cartel) in a networked market like the international natural gas market in Europe is feasible or not and if feasible how it would behave. - In Bochet et al.(2010a, submitted), we adopted a network analysis in the study of allocation problems without monetary transfers. There are many examples where the transfer of goods cannot be accompanied by monetary compensation due to high transaction costs or legal, ethical barriers. To count a few, the internal distribution of workload within a firm, the transfer of patients between hospitals, distribution of aid during a disaster relief operation, etc. Moreover, in Ilkiliç. and Kayi (2010) we analyse the fairness properties of more allocation rules to distribute scarce resources on a network. - In Bochet et al.(2010b), we analyse a moneyless market for a non-storable, non-transferable homogeneous commodity. The commodity is reallocated between agents with single-peaked preferences. Agents are either suppliers or demanders. Transfers between a supplier and a demander are feasible only if they are linked, and the links form a bipartite graph.

Data: CORDIS, © European Union