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Container shipping: A market equilibrium perspective on freight rates formation post-Covid-19

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  • Tvedt, Jostein
  • Hovi, Inger Beate

Abstract

The unprecedented container shipping freight rate levels post-Covid-19 are studied in a stochastic dynamic partial equilibrium framework. The proposed container marked model is calibrated on annual aggregate data from the two recent decades. The observed freight rate levels in 2021 and 2022 match a switch of competitive equilibria from Bertrand to Cournot competition. Whereas increased costs and reduced productivity play a role in explaining freight rates, these factors alone appear not to be able to justify the high post-Covid-19 freight rate levels.

Suggested Citation

  • Tvedt, Jostein & Hovi, Inger Beate, 2024. "Container shipping: A market equilibrium perspective on freight rates formation post-Covid-19," Transportation Research Part A: Policy and Practice, Elsevier, vol. 179(C).
    • Handle: RePEc:eee:transa:v:179:y:2024:i:c:s0965856423003373
    DOI: 10.1016/j.tra.2023.103917
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    Keywords

    Container shipping alliances; Shipping freight rates; Oligopoly;
    All these keywords.

    JEL classification:

    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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