The endogenous relationship between technology and market structure in container shipping: a synthesis of recent structural analyses

This article investigates the endogenous relationship between technological innovation, cooperative strategy, and market structure in the container shipping industry. The analysis is presented in two interconnected parts: a dynamic model of vertical technology adoption (vessel size) and a multi-market model of horizontal cooperation (strategic alliances). This work moves beyond existing qualitative analyses of scale economies and alliance incentives by developing and estimating structural models that quantify their competitive and welfare trade-offs. The dynamic analysis of investment in larger vessels reveals a nuanced, non-linear relationship between market structure and innovation incentives, consistent with the broader industrial organization literature, and identifies a welfare-optimal technology frontier at approximately 20,000 TEU, beyond which the anti-competitive effects of consolidation outweigh efficiency gains. Our multi-market analysis of alliances decomposes their value into supply-side efficiency gains, derived from the reallocation of heterogeneous vessel assets across markets with varying economies of scale, and demand-side market power effects. The stability of these alliances is shown to be contingent on the comparative advantages of their members, and on prevailing aggregate demand conditions. Together, these findings demonstrate that technology and market structure are inextricably linked in a dynamic feedback loop. The research culminates in a series of policy implications for infrastructure investment, which should be viewed as a tool of industrial policy that shapes the technology frontier, and for competition authorities, who require a sophisticated, dynamic framework to evaluate cooperative arrangements in this concentrated industry.