Private Port Pricing and Public Investment in Port and Hinterland Capacity
AbstractWe 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.
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Bibliographic InfoPaper provided by University of Antwerp, Faculty of Applied Economics in its series Working Papers with number 2007019.
Length: 44 pages
Date of creation: Oct 2007
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- Bruno De Borger & Stef Proost & Kurt Van Dender, 2008. "Private Port Pricing and Public Investment in Port and Hinterland Capacity," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 42(3), pages 527-561, September.
- Bruno De Borger & Stef Proost & Kurt Van Dender, 2007. "Private port pricing and public investment in port and Hinterland capacity," Center for Economic Studies - Discussion papers ces0708, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
- L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation
- R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
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