| dc.description.abstract | Exhaustible resources, like oil and gas, play an important strategic role in the world economy. Almost 30 years of oil domination, has resulted in acceptance of oil as a prime commodity in the transport sector, and has not been addressed as a strategic problem. The world dominance of oil creates intolerable power to those that dominates oil ownership and production, and has turned the commodity into an important strategic instrument. Political and economic consequences of resource dependency can be detected between Russia and the EU. Recently the crisis in Ukraine has spurred the need for diversification in energy mix and decreased dependency on Russian oil and gas. It is thus interesting to investigate how investments in renewable energy and new markets, can influence each other, and be effective instrument to not just to fight climate change, but also to ease the use of oil or gas as a strategic instrument. This paper applies a game theory framework to consider a strategic interaction between an exhaustible resource seller, who faces demand from two different buyers. It is a sequential game of two periods, were the first mover is buyer E to decide on an investment in a backstop technology. The second mover is the seller who makes a decision on quantity supplied and whether or not he wants to invest in a new market, buyer A. I find that if investment cost for the seller is very high. Seller will not invest and buyer E will invest as long as surplus from the new technology are over the calculated threshold. In the case where investment cost is very low, seller will invest something which is anticipated by buyer E who will also invest. In the case where investment costs for the seller are moderate, I get an interesting result demonstrating how the two investments options work complementary. Seller will only invest in the new market if buyer E invests in the alternative resource, and if buyer E chooses not to invest, the seller will neither invest. This can demonstrate the EU’s condition to invest in new technology, or renewable energy, and especially the potential power they have to influence Russia’s decision on investment in new markets. | eng |