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Analysis of strategic pricing in the port sector: The network approach

Author

Listed:
  • Hong-Oanh Nguyen

    () (Department of Maritime and Logistics Management, National Centre for Ports and Shipping, Australian Maritime College, University of Tasmania)

  • Anthony Chin

    (Department of Economics, National University of Singapore)

  • Jose Tongzon

    (Graduate School of Logistics, Inha University)

  • Mahinda Bandara

    (Department of Transport and Logistics Management, University of Moratuwa)

Abstract

Abstract This article demonstrates how interaction between ports in a network can be analysed in two stages. The first stage is the analysis of the price response functions and it examines how a port sets its prices for infrastructure services given those of its competitors. The second stage involves the identification of network relationships and analyses strategic interactions based on the results obtained from the first stage. The procedure is applied to analyse the network relationships between ports in three regions in Australia, namely Queensland, South Australia and Victoria, and Western Australia. The results provide insights into strategic interactions in port networks not previously seen in the literature. Especially, it has been found that, while some ports appear to strategically interact with each other in price setting, other ports prefer to set their own prices independently of each other. Moreover, strategic pricing can be asymmetric rather than symmetric. The result of our analysis has important implications for port management and policymakers. For example, while the existence of ‘complementary’ strategic pricing may not be seen as evidence of price leadership, it indicates that port users may not be able to shop around among competing ports if the existing port increases its prices.

Suggested Citation

  • Hong-Oanh Nguyen & Anthony Chin & Jose Tongzon & Mahinda Bandara, 2016. "Analysis of strategic pricing in the port sector: The network approach," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 18(3), pages 264-281, September.
  • Handle: RePEc:pal:marecl:v:18:y:2016:i:3:d:10.1057_mel.2015.9
    DOI: 10.1057/mel.2015.9
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    References listed on IDEAS

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