Lignite price negotiation between opencast mine and power plant as a two-stage, two-person, cooperative, non-zero sum game. Based on the simple model of the lignite deposit the methodology of finding the optimal solution for bilateral monopoly (BM) of lignite mine and power plant is shown taking into account nested pits generated by the pit optimisation process. It is proposed to treat lignite price negotiation as a kind of two-stage game. In the first step (cooperative) both sides should select the ultimate pit maximising joint profits of BM and in the second one (competitive) the agreement should be achieved regarding profit division. This can be realised through side payments or by establishing the lignite transfer price. Lack of cooperation and opportunism can lead to the suboptimal solution – excavation of the smaller pit. Due to existence of information asymmetry and the mine predominant strategy attainment of the optimal solution is more probably in vertically integrated firms. Dynamic adjustments of LOM BM plan to short-term changes of energy market using optimisation techniques, BM model, game theory and their valuation as real options is the new direction of further research.
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