Universität zu Köln

Hecking, Harald and Panke, Timo (2015). The global markets for coking coal and iron ore - Complementary goods, integrated mining companies and strategic behavior. Energy Econ., 52. S. 26 - 39. AMSTERDAM: ELSEVIER SCIENCE BV. ISSN 1873-6181

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Abstract

The global market for coking coal is linked to the global market for iron ore since both goods are complementary inputs in pig iron production. Moreover, international trade of both commodities is highly concentrated, with only a few large companies active on both input markets. Given this setting, the paper presented investigates the strategy of quantity-setting (Cournot) mining companies that own both a coking coal and an iron ore division. Do these firms optimize the divisions' output on a firm level or by each division separately (division-by-division)? First, using a theoretical model of two Cournot duopolies of complementary goods, we find that there exists a critical capacity constraint below/above at which firm-level optimization results in identical/superior profits compared with division-level optimization. Second, by applying a spatial multi-input equilibrium simulation model of the coking coal and iron ore markets, we find that due to the limited capacity firms gain no (substantial) additional benefit from optimizing output on a firm level. (C) 2015 Published by Elsevier B.V.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Hecking, Harald UNSPECIFIED UNSPECIFIED UNSPECIFIED Panke, Timo UNSPECIFIED UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-384839
DOI:	10.1016/j.eneco.2015.09.005
Journal or Publication Title:	Energy Econ.
Volume:	52
Page Range:	S. 26 - 39
Date:	2015
Publisher:	ELSEVIER SCIENCE BV
Place of Publication:	AMSTERDAM
ISSN:	1873-6181
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language QUANTITY COMPETITION; DUOPOLY; PRICE Multiple languages Economics Multiple languages
URI:	http://kups.ub.uni-koeln.de/id/eprint/38483