Strategic behaviour in international metallurgical coal markets

This paper analyses whether prices and trade-flows in the international market for metallurgical coals were subject to non-competitive conduct in the period 2008 to 2010. To do so, I develop mathematical programming models - a Stackelberg model, two varieties of a Cournot model, and a perfect competition model - for computing spatial equilibria in international resource markets. Results are analysed with various statistical measures to assess prediction accuracy of the models. The results show that real market equilibria cannot be reproduced with a competitive model. However, real market outcomes can be accurately simulated with the non-competitive models suggesting that market equilibria in the international metallurgical coal trade were subject to strategic behaviour of coal exporters.

► Were market outcomes in the metallurgical coal trade subject to strategic conduct? ► Mathematical programming models are used for computing equilibria in this market. ► The models are validated using a variety of statistical measures. ► Real market outcomes cannot be reproduced with a competitive model. ► Results suggest that metallurgical coal markets were driven by strategic behaviour.