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Competition and horizontal integration in maritime freight transport

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  • Rafael Moner
  • José J. Sempere
  • Pedro Cantos
  • Oscar Álvarez

Abstract

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 differentiated 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 profit maximizers, provides a first approximation to the determinants of market shares, profits, 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 profit of the merged firms and social welfare always increase. However, user surplus only increases when economies of scale are significantly exploited.

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Bibliographic Info

Paper provided by FEDEA in its series Working Papers with number 2010-13.

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Date of creation: Mar 2010
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Handle: RePEc:fda:fdaddt:2010-13

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Cited by:
  1. Saeed, Naima, 2013. "Cooperation among freight forwarders: Mode choice and intermodal freight transport," Research in Transportation Economics, Elsevier, vol. 42(1), pages 77-86.

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