In this paper we investigate natural gas producer's reactions to changes in market prices. We estimate price elasticities of aggregated supply in the most competitive market for natural gas: the United States. Using monthly time series data form 1987 to 2012 our analysis is based on an Autoregressive Distributed Lag (ARDL) Bound Cointegration approach to obtain short and long-run elasticities of natural gas supply. Results suggest that natural gas producers in a competitive market are not able to react to prices in the very short-run but respond inelastic in the long-run. These findings are not only of great value for policy makers but also for gas market modelers.
elasticity of supply natural gas ARDL ECM competitive markets