A Model of Partial Regulation in the Maritime Ferry Industry
AbstractIn this paper, we study how maritime ferry industries should be regulated. This is a fundamental issue in so far as maritime transport between islands and mainland is a service of general interest. We argue that the policy design crucially depends on the goals the collectivity pursues (pure eÂ¢ ciency, fairness) as well as on the relevant industry structure (monopoly, oligopoly). We show that the regulator needs to prevent ineÂ¢ cient crowding out, whenever room exists for access of new providers to former monopolies. By properly allocating traÂ¢ c across shippers, the regulated firm's budget constraint can then be relaxed. We subsequently shed light on the implications of adopting the territorial continuity principle to boost social fairness. We establish that the incumbent's public service obligations dump the entrant's incentives to provide connections in the low season; conversely, soft competition encourages the entrant to operate in the high season, when it pockets a net rent. As to customers, our model predicts that the islanders, whose consumption is partly subsidized by the non-residents, patronize the incumbent and that liberalization directly benefits the non-residents who switch to the entrant.
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Bibliographic InfoPaper provided by Dipartimento di Scienze Economiche e Metodi Matematici - Università di Bari in its series series with number 0010.
Date of creation: Jan 2006
Date of revision: Jan 2006
Maritime transport; Price and frequency; Partial regulation; Territorial;
Find related papers by JEL classification:
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation
- R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-29 (All new papers)
- NEP-COM-2006-01-29 (Industrial Competition)
- NEP-CSE-2006-01-29 (Economics of Strategic Management)
- NEP-MIC-2006-01-29 (Microeconomics)
- NEP-REG-2006-01-29 (Regulation)
- NEP-TUR-2006-01-29 (Tourism Economics)
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