CEU Electronic Theses and Dissertations, 2007
| Author | Ravinger, Filip |
|---|---|
| Title | Analyzing Oil Refinery Investment Decisions: A Game Theoretic Approach |
| Summary | The objective of this thesis is to build a model of strategic behavior in an oligopolistic market structure, which takes into account key features of the oil refinery industry, such as heterogeneity of the output, large-scale investment with sunk costs and a high degree of uncertainty over future payoffs. In view of recent demand shifts toward lighter refinery products, the question arises whether it is profitable to undertake the upgrade investment that enables to increase product yields of those products. Using game theory tools, multiproduct theory and a simple real-options analysis, a Cournot oligopoly model is devised to attempt to answer that question and to assess the investment behavior of refineries. It is argued that as long as some refinery enjoys a sufficient technological advantage, the equilibrium will have only this refinery investing. Further, the model gives insight into how changes in demand anticipations affect the equilibrium outcome of the investment game. Finally, the applicability of the model is illustrated by a case study, focusing on the Hungarian and Romanian oil refining sectors. |
| Supervisor | Baniak, Andrzej |
| Department | Economics MA |
| Full text | https://www.etd.ceu.edu/2007/c05raf01.pdf |
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