Mike Fusillo | Tufts University (original) (raw)

Papers by Mike Fusillo

Journal of Shipping and Trade, 2020

In the competitive environment of liner shipping, the ability to nimbly adjust shipping capacity ... more In the competitive environment of liner shipping, the ability to nimbly adjust shipping capacity to demand could mean the difference between a thriving shipping operation and one that will most likely fail. How quickly and effectively carriers adjust their capacity may depend on how their expectations regarding trade volumes and freight rates are formed. We find that if adaptive expectations prevail in the decision process, capacity deployment may suffer some degree of inertia but, compared to expectations that are formed rationally, capacity would be be relatively stable. On the other hand, if carrier expectations are rational, capacity deployment might be more likely to align closer and faster with demand. We seek to empirically test whether carriers’ expectations of demand, aiming at deploying the right amount of capacity, can be characterized as adaptive or rational. We find that a) in most cases, adaptive expectations is the paradigm in container shipping; b) the way expectatio...

Review of Industrial Organization, 2013

The Ocean Shipping Reform Act (OSRA) of 1998 significantly shifted the industrial structure of li... more The Ocean Shipping Reform Act (OSRA) of 1998 significantly shifted the industrial structure of liner shipping markets from one that was dominated by pricefixing liner shipping conferences to one that is dominated by non-binding discussion agreements, global alliances, and long-term confidential contracting. The objective of this paper is to determine the extent to which the abandonment of the liner conference system on U.S. trade lanes affected the market share stability of individual steamship lines. The approach is to estimate a model of market share variation in U.S. liner shipping markets and compare the results under the two separate regulatory regimes.

International Handbook of Maritime Economics, 2011

Maritime Economics & Logistics, 2003

Journal of Shipping and Trade, Jan 13, 2020

Decision-making in container shipping: reactive or proactive? “The best monopoly profit is a qu... more Decision-making in container shipping: reactive or proactive?

“The best monopoly profit is a quite life” used to tell me Sir John Hicks many years ago when, as a student, I was writing my thesis -The Dynamic Stability of Competitive Equilibrium- based on his book Value and Capital.

In our present research, Mike and I have tried to say something similar, albeit with different words: In imperfect markets (collusion, concentration, etc.), mistakes do not cost that much, and they can be easily corrected. Here, carrier short-run capacity deployment decisions could be described as ‘reactive’, or as ‘study as she goes’. In other words, carriers’ approach is fairly mechanistic: ‘let’s see what we did in the previous years, or what our competitors our doing, and do the same’. Expectations regarding future developments in their markets do not matter so much and, in a way, decisions are made reactively, like someone who tries to drive a car forward by looking in their rear view mirror. This is the essence of adaptive expectations.

On the contrary, competition obliges you to stand on your toes; to sit on the edge of your chair; to bite your nails; to look around and ahead and try to fathom every scrap of information coming your way which could impact your bottom line. Here, mistakes cost; sometimes they cost a lot, as the bankruptcy of Hanjin Shipping has showed us. Such a decision-making approach reflects the fundaments of rational expectations.

Mike and I therefore thought that if, through the use of shipping capacity deployment data, we could discover how shipowners form their expectations on future developments in their markets, i.e. adaptively or rationally, we should also be able to say something about the structure of their industry (imperfect or competitive). Such information, particularly today when the European Commission is considering extending for another five years its antitrust concessions to international shipping, might have a certain value...

Admittedly, our results are not as strong as we would like them to be, but this is a good thing and a good starting point for other researchers who would like to follow us. We however have been able to show that, in the more competitive Pacific market, carriers may tend to decide rationally; in the Atlantic market, instead, this could not be established and carriers there seem to be reactive rather proactive, forming their expectations adaptively.

If true, the latter finding (Atlantic) comes only to validate, for one more time, what we said 15 years ago in our Erasmus Report: “the disbanding of liner conferences from European trades has done little to increase competition in liner shipping”.

Hercules Haralambides
January 2020

Review of Industrial organization, Oct 2012

Maritime Policy & Management, 2006

Almost six years have elapsed since the passage of the Ocean Shipping Reform Act (OSRA), legislat... more Almost six years have elapsed since the passage of the Ocean Shipping Reform Act (OSRA), legislation that has led to significant changes in the structure of the US liner shipping industry. The European Union (EU) is poised to follow suit with the impending elimination of rule 4056/86, the block exemption from EU competition rules for liner shipping companies operating on European trades routes. The EU reform, however, is likely to go further than OSRA by prohibiting both conferences and discussion agreements on European trade routes. The outcome of such a policy is uncertain and the current review of it is several years old already. This paper is intended to provide some insight into the potential impact of regulatory reform in Europe, using the US experience as a benchmark. Specifically, the impact of OSRA with respect to industry structure, including its profitability, efficiency and what may be in store for the future is examined.

A b s t r a c t The virtual disappearance of liner shipping conferences from US markets and their... more A b s t r a c t The virtual disappearance of liner shipping conferences from US markets and their elimination in European trades create a significant risk that in place of these collusive price-setting groups, the industry could become increasingly consolidated. The absence of the conference pricing cushion could end up giving an advantage to large, cost-efficient carriers who will drive smaller players from the market. During this competitive process, shippers could see lower freight rates and better service but as the industry consolidates towards oligopoly, there is the risk that shippers will be faced with fewer alternatives to move their goods, lower service quality and significantly higher prices. The impact on merchandise trade could be substantial. This paper is intended to reveal basic structural characteristics of the liner shipping industry that could point to more accurate predictions of future consolidation activity. In particular, a series of mergers and acquisitions in the industry will be examined against the backdrop of industry structure and regulatory constraints. Ultimately, a Poisson model is formulated and estimated to extract and quantify the structural factors that increase the likelihood of horizontal merger and acquisition activity.