Port integration and competition under public and private ownership (original) (raw)

Private Port Pricing and Public Investment in Port and Hinterland Capacity

SSRN Electronic Journal, 2000

We study duopolistic pricing by ports that are congestible, share the same overseas customers and have each a downstream, congestible transport network to a common hinterland. In the central set-up, local (country) governments care about local welfare only and decide on the capacity of the port and of the hinterland network. We obtain the following results. First, profit-maximizing ports internalize hinterland congestion in as far as it affects their customers. Second, investment in port capacity reduces prices and congestion at both ports, but increases hinterland congestion in the region where the port investment is made. Investment in a port's hinterland is likely to lead to more port congestion and higher prices for port use, and to less congestion and a lower price at the competing port. Third, the induced increase in hinterland congestion is a substantial cost of port investment that strongly reduces the direct benefits of extra port activities. Fourth, imposing congestion tolls on the hinterland road network raises both port and hinterland capacity investments. We illustrate all results numerically and discuss policy implications.

Competition and horizontal integration in maritime freight transport

Transportation Research Part E: Logistics and Transportation Review, 2013

This paper develops a theoretical model for freight transport characterized by competition between means of transport (the road and maritime sectors), where modes are perceived as di!erentiated products. Competitive behavior is assumed in the road freight sector, and there are constant returns to scale. In contrast, the freight maritime sector is characterized by oligopolistic behavior, where shipping lines enjoy economies of scale. The market equilibrium where the shipping lines behave as prot maximizers, provides a rst approximation to the determinants of market shares, prots, and user welfare. We then characterize the equilibrium when horizontal integration of shipping lines occurs, with and without further economies of scale. An empirical application to the routes Valencia-Antwerp and Valencia-Genoa uncovers that the joint prot of the merged rms and social welfare always increase. However, user surplus only increases when economies of scale are signicantly exploited.

Spatial non-price competition in port infrastructure services

2017

This study analyses the possible existence of spatial non-price competition in the port industry. We propose a dynamic two-stage model that allows: (1) to estimate the sensitivity of generation and diversion of traffic caused by port capacity expansions; (2) to quantify the degree of capacity competition; (3) to simulate a hypothetical scenario of cooperation agreements among different port authorities. The econometric specification is based on a structural model of demand, cost and market equilibrium. The empirical results suggest that non-price competition exists in port infrastructure services. Furthermore, using a simulation analysis, we show that incentives to invest in port capacity decrease under a cooperative setting.

Seaport competition and strategic investment in accessibility

We investigate strategic investment decisions of local governments on inland transportation infrastructure in the context of seaport competition. We consider two seaports with their respective catchment areas and a common hinterland for which seaports compete. The two seaports and the common hinterland belong to three independent local governments, each determining the level of investment for its own inland transportation system. We find: (i) increasing investment in the hinterland lowers charges at both ports; and (ii) increasing investment in a port's catchment area will cause severer reduction in charge at its port than at the rival port. We also examine the non-cooperative optimal investment decisions and equilibrium investment levels under various coalitions.

Port competition using capacity expansion and pricing

2009

This study models two ports, serving the same hinterland, competing strategically using both pricing and capacity investment. Both ports are profit maximizers, and port expansions are lumpy, indivisible and irreversible. The decision making process of the two ports is analyzed using a two-stage game. In the first stage, two ports compete with each other on capacity expansion. In the second stage, they follow Bertrand competition with differentiated products conditional on realized port capacities. Within this formulation, we show the existence of unique Nash equilibrium in the pricing sub game, and the change of the equilibrium price with operation cost, market demand determinants and capacity sizes using comparative statics. In capacity investment game, we identified the pure strategy Nash equilibriums for different scenarios characterized by the incremental benefit of expansion and the annual capital cost of investment. Through both analytical study and numerical simulation, we show that the capacity expansion at any port will decrease the equilibrium prices at both ports, thus beneficial to the port users. Smaller port with more elastic demand and lower operation and investment cost is more likely to expand in an increasing market. Capacity expansion may result in lower total profit of the two ports, which is analogous to a Prisoner's Dilemma.

Analysis of the benefits of intra-port competition

International Journal of Transport Economics, 33(1), 69-85, 2006

Intra-port competition is widely regarded as beneficial, for the competitiveness of ports, for local and national economies and for consumers and exporting industries. The aim of the paper is to analyse the benefits resulting from the presence of intra-port competition. Even though this issue has been addressed before, a thorough and complete overview of the effects of intra-port competition, enabling conditions for intra-port competition and policies in case of lacking intra-port competition are absent. The paper presents first a short overview of previous studies dealing with intra-port competition. Second, it discusses two main arguments underlying the benefits of intra-port competition. In this context, attention is given the relation between intra-port and inter-port competition. Third, the paper examines the conditions under which these arguments are valid and intra-port competition can be introduced. Finally, possible policy responses to limited or absent intra-port competition are discussed and some empirical evidence from previous studies are presented. The authors conclude that the arguments for the benefits of intra-port competition are compelling, and therefore suggest the consideration of policies to introduce such competition. Keywords: ports, intra-port competition, regulation, port policies

The Role of Various Players in the Port Industry – Theory and Practice

2006

This paper examines the role of the various players in the port industry and their interactions, and determines the impact of their actions in port operations. A mathematical approach has been developed to assist port authorities in decision making for infrastructure investment. The model examines the port investment decisions within the context of a multimodal transportation system. Model results are used to answer questions regarding the optimal investment strategy of a port authority in order to maximize the net social benefit; the impact of this strategy to the terminal operators and users; the effect of competition or cooperation between carriers; and the shippers' behavior in terms of quantity and price of goods shipped over the intermodal network. The paper concludes with a practical interpretation of the results of the theoretical models. Further improvements that would capture real world issues that are not adequately treated by the current models are discussed.

Game Theory and Port Economics: A Survey of Recent Research

Journal of Economic Surveys, 2016

The last decade has seen a significant upsurge of studies seeking to examine the impacts of port agents' strategic decisions. The outcome has been a wide range of results and conclusions. The aim of this work is to provide a review of this recent research in the port industry that uses strategic interaction approaches from industrial organization and game theory. The paper concentrates on five topics: ownership, relationship between ports and their hinterlands, port authorities and port operators' relations, capacity investment decisions and port specialization. We present the objectives, methodologies and results of the papers reviewed, with special emphasis on how models are developed. The results are not always consistent between the works analyzed. On the one hand, this could be due to the complexity of the port industry and the high number of agents that intervene. Researchers need to simplify reality to build their models by imposing restrictive assumptions. On the other hand, results could be very sensitive to the techniques used or to the differences on the port environment of the countries of study. However, some conclusions can be extracted and they present a good starting point to develop more sophisticated models. Finally, we also propose avenues for future research.

The impact of hinterland access conditions on rivalry between ports

2008

This paper examines the interaction between hinterland access conditions and port competition. Competition between ports is treated as competition between alternate intermodal transportation chains, while the hinterland access conditions are represented by both the corridor facilities and the inland roads. We find that when ports compete in quantities, an increase in corridor capacity will increase own port's output, reduce the rival port's output, and increase own port's profit. On the other hand, an increase in inland road capacity may or may not increase own port's output and profit, owing to various offsetting effects. Essentially, while more road capacity reduces local delays and moderates the negative impact of own output expansion, it induces greater local commuter traffic and may moderate the reduction by local commuter traffic in response to a rise in cargo traffic, both of which reduces own output and profit. Similarly, inland road pricing may or may not increase own port's output and profit. Finally, case examples for selected ports and regions are discussed.