Hold-up and Strategic Investment in InternationalTransport Networks:Gas Pipelines in North Western Europe

We propose a variant of the incomplete contract framework to analyze strategicinvestment in international transport networks, where investment is observable andsome, but not all, players cannot make long-term commitments regarding accessto their transport infrastructure. Those players who can commit may exchangeaccess rights and ownership titles and coordinate their investment. All others mayonly join specic pipeline consortia based on cost sharing. Quasi rents at the nalproduction stage are shared through bargaining. The North-Western corridor forRussian natural gas oers a nice example for such heterogeneity among players anda rare opportunity to calibrate an incomplete contract model to obtain quantitativeresults...