Pricing Strategy of Russian and European Gas Supply Based on Game Theory

Abstract

Now, due to the outbreak of the Russia-Ukraine war and years of friction between Russia and the EU, the gas issue has become a means for Russia to counter European sanctions, so that Russia reduced or even began to refuse to supply gas to Europe. The measure also pushed gas prices to new heights. This paper focuses on the supply chain of natural gas through Ukraine as the target, and explores the pricing problem in this aspect of the Russian-European gas supply chain based on the Stackelberg game theory. The ratio of price to profit before and after the war between Russia and Ukraine is respectively explored, and the pricing models under the assumptions of Russia as the dominant, Ukrainian pipeline company as the dominant and European as the dominant and the respective profits are explored. Finally, this model is used to analyze the future trend of natural gas between Russia and Europe. The results show that the profits of the three parties are affected by the market size and the price sensitivity of consumers, and in the case of Russia as the leader, the profits of Russia and Europe are the largest in all cases. This research can also be used as the experience of the gas supply chain between China and Russia in the future to further improve the economic profits of both sides.