ANALYSIS OF INTERNATIONAL OIL PRODUCTION COMPETITON USING GAME THEORY

Year 2022, , 994 - 1013, 29.07.2022

Kayhan Çelik , Fatih Kaplan

https://doi.org/10.30798/makuiibf.914942

Abstract

The assumption that the players in the international crude oil market are OPEC (Organization of Petroleum Exporting Countries) member countries and non-OPEC oil producing countries is common. That the players enter into a competitive tendency by using various strategy sets such as production level and price to maximize profit and / or controlling the oil markets reveals that the market in question can be analyzed with game theory models. The aim of this study is to analyze the competitive oil production amounts of OPEC and non-OPEC countries on the basis of game theory. For this purpose, the production amounts and crude oil price series of these players covering the period 1972-2019 were used. The coefficients of production functions that show the existence of competition in oil markets are estimated by the Fully Modified Ordinary Least Square (FMOLS) method. Cournot-Nash and Stackelberg equilibrium solutions are calculated based on the obtained models. According to the Cournot-Nash equilibrium, at the Stackelberg equilibrium, it was observed that the production level of the leader player increased and the production level of the follower player decreased. The findings are in line with studies in which Cournot-Nash equilibrium outputs are higher than Stackelberg equilibrium outputs. It is suggested that the players stay in the Cournot-Nash equilibrium in order to reach the optimal level of production through production quantity and price strategies.

Keywords

Oil Market, Game Theory, Cournot-Nash Equilibrium, Stackelberg Equilibrium, OPEC

ULUSLARARASI PETROL ÜRETİM REKABETİNİN OYUN TEORİSİ İLE ANALİZİ

Abstract

Uluslararası ham petrol piyasasında oyuncuların OPEC (Petrol İhraç Eden Ülkeler Örgütü) üye ülkeleri ile OPEC’e üye olmayan petrol üreten ülkeler (non-OPEC) oldukları varsayımı yaygındır. Söz konusu oyuncuların kâr maksimizasyonu ve/veya petrol piyasalarını kontrol edebilme hedefiyle üretim seviyesi ve fiyat gibi çeşitli strateji kümeleri kullanarak rekabet eğilimine girmeleri söz konusu piyasanın oyun modelleri ile analiz edilebilirliğini ortaya koymaktadır. Bu çalışmanın amacı, OPEC ve non-OPEC ülkelerinin rekabete dayalı petrol üretim miktarlarını oyun teorisi temelinde analiz etmektir. Bu amaç doğrultusunda, oyunculara ait 1972-2019 dönemini kapsayan üretim miktarları ve ham petrol fiyat serileri kullanılmıştır. Petrol piyasalarındaki rekabetin varlığına işaret eden üretim fonksiyonlarına ait katsayılar Tam Bilgi En Küçük Kareler (FMOLS- Fully Modified Ordinary Least Square) yöntemi ile tahmin edilmiştir. Elde edilen modellerden Cournot-Nash ve Stackelberg denge çözümleri hesaplanmıştır. Cournot-Nash denge düzeyine göre Stackelberg denge düzeylerinde lider oyuncunun üretiminin artığı, takipçi oyuncunun üretim düzeyinin ise azaldığı görülmüştür. Bulgular Cournot-Nash denge çıktılarının Stackelberg denge çıktılarından daha yüksek olduğu çalışmalar ile paralellik göstermiştir. Oyuncuların üretim miktarı ve fiyat stratejileri vasıtasıyla optimum üretim düzeyine ulaşmaları için Cournot-Nash dengesinde kalmaları önerilmektedir.

Keywords

Petrol Piyasası, Oyun Teorisi, Cournot-Nash Dengesi, Stackelberg Dengesi, OPEC

References

• Adelman, M. A. (1982). OPEC as a Cartel in J. M. Griffin and D.J. Teece, OPEC Behavior and World Oil Prices, London: George Allen and Unwin: 37-63.
• Alhajji, A. & Huettner, D. (2000) “OPEC and World Crude Oil Markets From 1973 to 1994: Cartel, Oligopoly, or Competitive”, Energy Journal, 21(3): 31-60.
• Almoguera, P. A. & Douglas, C. C., & Herrera, A. M. (2011), “Testing for the cartel in OPEC: non-cooperative collusion or just non-cooperative?” Oxford Review of Economic Policy, 27(1), 144-168.
• Aperjis, D. (1982). The Oil Market in the 1980s, OPEC Oil Policy and Economic Development. Cambridge, MA: Ballinger Publishing Company.
• Becker, R. & Enders, W., & Lee, J. (2006) “A Stationarity Test in The Presence of an Unknown Number of Smooth Breaks”, Journal of Time Series Analysis 27, 381–409.
• Bockem, S. (2004). Cartel formation and oligopoly structure: a new assessment of the crude oil market. Applied Economics, 36(12), 1355-1369.
• BP, (2020). BP Statistical Review of World Energy Full Report. https://www.bp.com/content/dam/bp/business sites/en/global/corporate/pdfs/energy-economics/statistical-review/bp-stats-review-2020-full-report.pdf Erişim Tarihi 06.06.2020
• Chang, Y., Yi, J., Yan, W., Yang, X., Zhang, S., Gao, Y., & Wang, X. (2014), “Oil supply between OPEC and non-OPEC based on game theory”, International Journal of Systems Science, 45(10), 2127 2132.
• Cournot, A. A. (1838). Recherches sur les principes mathématiques de la théorie des richesses. L. Hachette.
• Cumbul, E. (2021). Stackelberg versus Cournot oligopoly with private information. International Journal of Industrial Organization, 74, 102674.
• Dahl, C. Yucel, M. (1991). “Testing Alternative Hypotheses of Oil Production Behavior”, Energy Journal, 12(4): 117-138.
• Daughety, A. F. (1990). Beneficial concentration. The American Economic Review, 80(5), 1231-1237.
• De Santis R. A. (2003), “ Crude Oil Price Fluctuations and Saudi Arabia's Behavior”, Energy Economics, 25: 155-173
• Dickey, D. A., & Fuller, W. A. (1981) “ Likelihood Ratio Statistics for Autoregressive Time Series with A Unit Root”, Econometrica: journal of the Econometric Society, 1057-1072.
• EIA (2018). ABD Enerji Bilgi İdaresi (U.S. Energy Information Administration Data), https://www.eia.gov/dnav/pet/pet_pri_spt_s1_d.htm Erişim Tarihi: 03.04.2020.
• Elliot, A. J., & Harackiewicz, J. M. (1996). “Approach and avoidance achievement goals and intrinsic motivation: A mediational analysis”, Journal of Personality and Social Psychology, 70(3), 461
• Enders, W. (2008). Applied Econometric Time Series. John Wiley & Sons.
• Enders, W., & Lee, J. (2012a). “A Unit Root Test Using A Fourier Series To Approximate Smooth Breaks”, Oxford Bulletin Of Economics and Statistics, 74(4), 574-599
• Enders, W., & Lee, J. (2012b). “The flexible Fourier form and Dickey–Fuller Type Unit Root Tests”. Economics Letters, 117(1), 196-199.
• Eni World Oil Review (2020), O&GR Volume 1 World Oil Review 2020, https://www.eni.com/assets/documents/eng/scenari-energetici/WORLD-OIL-REVIEW-2020-vol1.pdf Erişim 09.08.2020
• Ezzati, A. (1976). “Future OPEC Price and Production Strategies as Affected by its Capacity to Absorb”, European Economic Review, 8(2), 107-138.
• Geroski, P. A. & Ulph, A. M., & Ulph, D. T. (1987).” A Model of the Crude Oil Market in which Market Conduct Varies. The Economic Journal, 97, 77-86.
• Gibbons, R. S. (1992). “Game theory for applied economists”, Princeton University Press.
• Giz, D. (2003). “Oyun Teorisi ve İktisadi Uygulamaları”, Filiz Kitabevi, İstanbul,, s11.
• Griffin G. M., & Teece D. J. (1982). OPEC Behavior and World Oil Prices. George Allen & Unwin Publishers Ltd, UK.
• Griffin, J. M. (1985). “OPEC Behavior: A Test of Alternative Hypotheses”, American Economics Review, 75(5): 954-963.
• Griffin, J., & Steele H. (1986). Energy Economics and Policy. New York: Academic Press.
• Gulen, S.G. (1996). “Is OPEC a Cartel? Evidence from Cointegration and Causality Tests”, The Energy Journal, 17(2): 43-57.
• Hammoudeh, S. (1997), “Oil Pricing Policies in a Target Zone Model ”, Research in Human Capital and Development, 11-B, 497-513.
• Hansen, B.E. (1992), “Tests for Parameter Instability in Regressions with Processes”, Journal of Business and Economic Statistics, 10(2), 321-35
• Hirst, D. (1966). Oil and public opinion in the Middle East. London Faber and Faber.
• Huck, S., Müller, W., & Normann, H. T. (2001). Stackelberg beats Cournot: On collusion and efficiency in experimental markets. The Economic Journal, 111(474), 749-765.
• Ino, H., & Matsumura, T. (2012). How many firms should be leaders? Beneficial concentration revisited. International Economic Review, 53(4), 1323-1340.
• Ino, H., & Matsumura, T. (2013). Asymmetric welfare implication between a small number of leaders and a small number of followers in Stackelberg models (No. 098).
• Kaplan, F., & Çelik, K. (2017), “Uluslararası Petrol Piyasasında Üretim Dengesi: Bir Oyun Teorisi Yaklaşımı”, Ekonomi Bilimleri Dergisi, 9(2), 29-42.
• Kwiatkowski, D. & Phillips, P. C. & Schmidt, P. & Shin, Y. (1992), “Testing the null hypothesis of stationarity against the alternative of a unit root: How sure are we that economic time series have a unit root?”, Journal of Econometrics, 54(1-3), 159-178
• Leonard, R. J. (1994). Reading Cournot, reading Nash: The creation and stabilisation of the Nash equilibrium. The Economic Journal, 104(424), 492-511.
• Lotfi, E. & Navidi, H. (2012). “A Decision Support System for OPEC Oil Production Level based on Game Theory and ANN”, Advances in Computational Mathematics and its Applications, 2(1).
• MacAvoy, P. (1982),Crude Oil Prices as Determined by OPEC and Market Fundamentals. Ballinger
• Maki, D. (2012). “Tests for Cointegration Allowing for an Unknown Number of Breaks”. Economic Modelling, 29(5), 2013.
• Molchanov, P. (2003). A statistical analysis of OPEC quota violations. Economics. Duke University, Durham, NC, 1-31.
• Moorthy, K. S. (1985), “Using Game Theory to Model Competition. Journal of Marketing Research”, 22(3), 262-282
• Ng, S. & Perron, P. (2001), “Lag Length Selection and The Construction of Unit Root Tests With Good Size And Power”, Econometrica, 69(6), 1519-1554.
• OPEC, (2020). Annual Statistical Bulletin, https://asb.opec.org/ASB_PDFDownload.php Erişim Tarihi 03.04.2020
• Osborne, M. J. (2004). An introduction to game theory. New York: Oxford University Press.
• Parra, F. (2010). Oil Politics: A Modern History of Petroleum. New York: I.B. Tauris, ISBN: 184–8–8512–94
• Perron, P. (1989), “The Great Crash, The Oil Price Shock, and The Unit Root Hypothesis”, Econometrica: Journal of the Econometric Society, 1361-1401.
• Peters, H. (2015). Game theory: A Multi-leveled approach. Springer.
• Phillips, P. C. & Hansen, B. E. (1990), “Statistical inference in instrumental variables regression with I (1) processes”, The Review of Economic Studies, 57(1), 99-125
• Phillips, P. C. & Perron, P. (1988), “Testing for A Unit Root in Time Series Regression”, Biometrika, 75(2), 335-346.
• Ramcharran, H. (2002), “Oil production responses to price changes: an empirical application of the competitive model to OPEC and non-OPEC countries”, Energy economics, 24(2), 97-106.
• Ratti, R. A. & Vespignani, J. L. (2015), “OPEC and non-OPEC oil production and the global economy”, Energy Economics, 50, 364-378.
• Reuters (2019). https://www.reuters.com/article/oil-opec/timeline-opecs-oil-output-changes-since-the-1990s-idUSL8N28F31F Erişim Tarihi 03.04.2020
• Rodrigues, P. M. & Taylor, A. R. (2012), “The Flexible Fourier Form and Local Generalised Least Squares De‐trended Unit Root Tests ”, Oxford Bulletin of Economics and Statistics, 74(5), 736-759.
• Shenoy, P. P. (1980a), “A three-person cooperative game formulation of the world oil market ”, Applied Mathematical Modelling, 4(4), 301-307.
• Shenoy, P. P. (1980b), “A two-person non-zero-sum game model of the world oil market ”, Applied Mathematical Modelling, 4(4), 295-300.
• Singer, S. F. (1983), “The Price of World Oil ”,Annual Review of Energy, 8, 97-116.
• Smith, J.L. (2005). “Inscrutable OPEC? Behavioral Tests of the Cartel Hypothesis” Energy Journal, 26 (1): 51–82.
• Tussing, A. R. & Van Vactor, S. A. (1989).”Prospective on World Energy Markets: Real Costs Will Continue to Fall”, In Energy Supply in the 1990s and Beyond, 11th IAEE International Conference, 1989. International Association for Energy Economics.
• Von Stackelberg, H. (1934). Marktform und Gleichgewicht. Vienna and Berlin: Springer Verlag
• Yalçıntaş, M. (2015). “Ekonomik Karar Almada Adalet ve Oyun Teorisi”, Maliye ve Finans Yazıları, 1(103), 247-273.
• Yardımcıoğlu, F. & Gülmez, A. (2013). “Türk cumhuriyetlerinde ihracat ve ekonomik büyüme ilişkisi: Panel eşbütünleşme ve panel nedensellik analizi,” Bilgi Ekonomisi ve Yönetimi Dergisi, 8(1), 145-161.
• Yılancı, V. (2017), “Petrol Fiyatları ve Ekonomik Büyüme Arasındaki İlişkinin İncelenmesi: Fourier Yaklaşımı, Ekonometri ve İstatistik e-Dergisi, 27, 51-67.