Empirical essays on the price formation in resource markets

The thesis at hand seeks to augment the understanding of price formation in resource markets. More specifically, the five essays that are part of the thesis are concerned with two research questions: i) Do players in resource markets behave strategically and, if so, how does their behaviour influence price formation? ii) How do different trade products of the same commodity influence each other's price formation? While the first four essays focus on the former research question, the final essay is concerned with the latter. Chapter 2 assesses the effects of a supply shock on the global natural gas market. By modelling gas supply as a spatial Cournot oligopoly, the paper investigates the vulnerability of different gas importing countries to price increases during a supply shock. It seeks to evaluate the countries' strategic positions during a crisis, which are mainly influenced by their access to gas infrastructure and resource endowment. Chapter 3 deals again with supply-side oligopolies. However, the paper presented here does not account only for one market but rather for two interacting markets. The research is motivated by the need for complementary inputs in steel production, namely iron ore and coking coal. Interestingly, some of the biggest mining companies play a major role in both markets. Therefore, we question the optimal business strategy for these oligopolists: Do they optimise the iron ore and the coking coal divisions on a firm or a division level? In contrast to the previous chapters, Chapter 5 presents an econometric analysis that uses a novel application of stochastic frontier analysis (SFA) to determine the exercise of market power in the iron ore market on a firm level. More specifically, the effect of macroeconomic variables and firm-specific characteristics on the individual firm's ability to drive prices above marginal costs measured by firm-specific Lerner indices is estimated. The focus of the thesis’ final chapter lies on the analysis of price formation in the international market for thermal coal. International trade of thermal coal, and in particular trade of derivatives, is still in its infancy compared to other commodity markets. We are interested in better understanding the process of price formation in such an environment. To this end, we analyse price formation in an intertemporal framework, i.e., the causal relationship between spot and futures prices, as well as an interregional context, i.e., between prices of two of the most important global trading hubs