Two markets and a weak link

We characterise the relationship between two network based oligopoly markets when local players share the interconnection's ownership. To that purpose, we analyse the case of the Bacton (UK)-Zeebrugge (Belgium) natural gas pipeline using Vector Auto-regressive Representation techniques. We conclude that there is a threshold of capacity deployment after which the two local markets split. As a result, the relationship between local price differentials and capacity utilisation is increasing and convex. We also show that the local prices' dynamic structure is characterised by convergence features. (c) 2006 Elsevier B.V. All rights reserved.