IDEAS home Printed from https://ideas.repec.org/a/eee/proeco/v122y2009i1p118-126.html
   My bibliography  Save this article

An approach for measuring the optimal fleet capacity: Evidence from the container shipping lines in Taiwan

Author

Listed:
  • Wu, Wei-Ming

Abstract

Excess capacity emerges as a persistent problem in the shipping industry and plays an essential role in determining the level of ocean freight. Consequently, the optimal fleet capacity has become a critical and frequently discussed issue within the container shipping industry. In practice, the designed capacity of a vessel is the most popular approach for measuring the fleet capacity for a shipping line. Despite this, it continues to lack the operational and economical reasonableness necessary to properly define or measure the capacity provided by a shipping line. This study has developed an economic model to find the optimal fleet capacity. In turn, the corresponding installation ratios have been computed to examine the level of excess capacity present and evaluate the performance of fleet development for three container shipping lines in Taiwan. The findings suggest that the shipping lines with deep-sea service routes are likely to deliberately hold excess capacity. Thus, the strategy of holding excess capacity to deter entry and maintain market power may have implicitly played a crucial role in determining the scale of fleet capacity for a container shipping line.

Suggested Citation

  • Wu, Wei-Ming, 2009. "An approach for measuring the optimal fleet capacity: Evidence from the container shipping lines in Taiwan," International Journal of Production Economics, Elsevier, vol. 122(1), pages 118-126, November.
  • Handle: RePEc:eee:proeco:v:122:y:2009:i:1:p:118-126
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0925-5273(09)00144-3
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Sjostrom William, 2004. "Ocean Shipping Cartels: A Survey," Review of Network Economics, De Gruyter, vol. 3(2), pages 1-28, June.
    2. Coelli, Tim & Grifell-Tatje, Emili & Perelman, Sergio, 2002. "Capacity utilisation and profitability: A decomposition of short-run profit efficiency," International Journal of Production Economics, Elsevier, vol. 79(3), pages 261-278, October.
    3. A. Michael Spence, 1977. "Entry, Capacity, Investment and Oligopolistic Pricing," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 534-544, Autumn.
    4. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March.
    5. Rodriguez-Alvarez, Ana & Tovar, Beatriz & Trujillo, Lourdes, 2007. "Firm and time varying technical and allocative efficiency: An application to port cargo handling firms," International Journal of Production Economics, Elsevier, vol. 109(1-2), pages 149-161, September.
    6. von Ungern-Sternberg, Thomas, 1988. "Excess Capacity as a Commitment to Promote Entry," Journal of Industrial Economics, Wiley Blackwell, vol. 37(2), pages 113-122, December.
    7. Osborne, Martin J & Pitchik, Carolyn, 1987. "Cartels, Profits and Excess Capacity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(2), pages 413-428, June.
    8. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1975. "Transcendental Logarithmic Utility Functions," American Economic Review, American Economic Association, vol. 65(3), pages 367-383, June.
    9. Caves, Douglas W & Christensen, Laurits R & Swanson, Joseph A, 1981. "Productivity Growth, Scale Economies, and Capacity Utilization in U.S. Railroads, 1955-74," American Economic Review, American Economic Association, vol. 71(5), pages 994-1002, December.
    10. Sidney Gilman, 1999. "The Size Economies and Network Efficiency of Large Containerships," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 1(1), pages 39-59, September.
    11. Viton, Philip A, 1981. "A Translog Cost Function for Urban Bus Transit," Journal of Industrial Economics, Wiley Blackwell, vol. 29(3), pages 287-304, March.
    12. Don Taylor, G. & Love, Doug M. & Weaver, Miles W. & Stone, James, 2008. "Determining inventory service support levels in multi-national companies," International Journal of Production Economics, Elsevier, vol. 116(1), pages 1-11, November.
    13. Imai, Akio & Nishimura, Etsuko & Papadimitriou, Stratos & Liu, Miaojia, 2006. "The economic viability of container mega-ships," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 42(1), pages 21-41, January.
    14. Mike Fusillo, 2003. "Excess Capacity and Entry Deterrence: The Case of Ocean Liner Shipping Markets," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 5(2), pages 100-115, June.
    15. Pirrong, Stephen Craig, 1992. "An Application of Core Theory to the Analysis of Ocean Shipping Markets," Journal of Law and Economics, University of Chicago Press, vol. 35(1), pages 89-131, April.
    16. Telser,Lester G., 1987. "A Theory of Efficient Cooperation and Competition," Cambridge Books, Cambridge University Press, number 9780521306195.
    17. Sjostrom, William, 1989. "Collusion in Ocean Shipping: A Test of Monopoly and Empty Core Model s," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1160-1179, October.
    18. Mike Fusillo, 2004. "Is Liner Shipping Supply Fixed?," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 6(3), pages 220-235, September.
    19. Lau, Lawrence J., 1976. "A characterization of the normalized restricted profit function," Journal of Economic Theory, Elsevier, vol. 12(1), pages 131-163, February.
    20. Nelson, Randy A, 1989. "On the Measurement of Capacity Utilization," Journal of Industrial Economics, Wiley Blackwell, vol. 37(3), pages 273-286, March.
    21. Michael C Ircha, 2001. "Serving Tomorrow's Mega-Size Containerships: The Canadian Solution," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 3(3), pages 318-332, September.
    22. Abdul Azeez, 2001. "Utilization of optimal capacity in Indian manufacturing, 1974-1996," Applied Economics Letters, Taylor & Francis Journals, vol. 8(9), pages 623-628.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:eee:eneeco:v:72:y:2018:i:c:p:290-306 is not listed on IDEAS
    2. Wu, Wei-Ming & Lin, Tsan-Hwan, 2015. "Selection behavior of the global container shipping industry for carrier-owned and leased containers," Transport Policy, Elsevier, vol. 37(C), pages 11-19.
    3. Wu, Wei-Ming & Lin, Jenn-Rong, 2015. "Productivity growth, scale economies, ship size economies and technical progress for the container shipping industry in Taiwan," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 73(C), pages 1-16.
    4. Kayakutlu, Gulgun & Buyukozkan, Gulcin, 2011. "Assessing performance factors for a 3PL in a value chain," International Journal of Production Economics, Elsevier, vol. 131(2), pages 441-452, June.
    5. repec:eee:transe:v:111:y:2018:i:c:p:18-39 is not listed on IDEAS

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:proeco:v:122:y:2009:i:1:p:118-126. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/ijpe .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.