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Application of Game Theory - OPEC Dynamics

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Joydeep Mukherjee
Joydeep Mukherjee

OPEC dynamics interpreted through Nash Equilibrium & Stackleberg Game Theory.

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OPEC ROLE IN GLOBAL OIL MARKET STRUCTURE Presented by: JOYDEEP MUKHERJEE (20081020) MOHIT RAJ (20081030) MRUGESH BRAHMBHATT (20081031) REJO MATHEW (20081042) VIKRAM DESHMUKH (20081057)
Factors affecting OPEC Pricing Model + OPEC behaviour is not constant and can exhibit variation in conduct with important implications on price dynamics in the oil market + OPEC’s influence is asymmetrical depending on whether it is responding to rising or falling global oil demand + The shift to the futures markets for price determination has introduced a large number of players and the large variety of participants has complicated the process of decision-making within OPEC
Intra-OPEC Scenario ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
NASH EQUILIBRIUM SAUDI ARABIA REST OF THE PLAYERS (OPEC) Fair Cheat All figures are in million Dominant Strategy
Inference from NASH Equilibrium ,[object Object],[object Object],[object Object],[object Object],[object Object]
OPEC Price v/s Renewable Energy Investment ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
STACKLEBERG GAME IMPORTING COUNTRY OPEC OPEC Invest in Renewable sources Do not invest in Renewable sources Low Low Maintain Maintain (1398, 4193) (0, 14910) (0, 5591.25) (11182, 3727) 0.25*75*74.55 =1398 0.75*75*74.55 = 4193 0.75*200*74.55= 11182 0.25*200*74.55= 3727 75* 74.55 = 5591.25 200*74.55 = 14910 (All figures are in multiples of 10^8)
Inference from STACKLEBERG GAME ,[object Object],[object Object],[object Object]
[object Object]

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Application of Game Theory - OPEC Dynamics

  • 1. OPEC ROLE IN GLOBAL OIL MARKET STRUCTURE Presented by: JOYDEEP MUKHERJEE (20081020) MOHIT RAJ (20081030) MRUGESH BRAHMBHATT (20081031) REJO MATHEW (20081042) VIKRAM DESHMUKH (20081057)
  • 2. Factors affecting OPEC Pricing Model + OPEC behaviour is not constant and can exhibit variation in conduct with important implications on price dynamics in the oil market + OPEC’s influence is asymmetrical depending on whether it is responding to rising or falling global oil demand + The shift to the futures markets for price determination has introduced a large number of players and the large variety of participants has complicated the process of decision-making within OPEC
  • 3.
  • 4. NASH EQUILIBRIUM SAUDI ARABIA REST OF THE PLAYERS (OPEC) Fair Cheat All figures are in million Dominant Strategy
  • 5.
  • 6.
  • 7. STACKLEBERG GAME IMPORTING COUNTRY OPEC OPEC Invest in Renewable sources Do not invest in Renewable sources Low Low Maintain Maintain (1398, 4193) (0, 14910) (0, 5591.25) (11182, 3727) 0.25*75*74.55 =1398 0.75*75*74.55 = 4193 0.75*200*74.55= 11182 0.25*200*74.55= 3727 75* 74.55 = 5591.25 200*74.55 = 14910 (All figures are in multiples of 10^8)
  • 8.
  • 9.