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The Effect of Competition on Economic Rents in Seaports

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  • Peran van Reeven

Abstract

The Landlord Port model is the dominant port model in larger and medium-sized ports. The potential advantage of this organisational system is that the vertical separation of port authority and service provision allows for competition between different service suppliers in a port. This paper analyses such competition in a horizontal product differentiation model in which two ports compete for cargo trans-shipments. The model shows that the Landlord Port model is Nash equilibrium, and that this organisational form yields the highest profits for the port industry, and the highest prices for its customers. Introduction of intra-port competition into the Landlord model decreases industry profits and prices, which makes the port industry reluctant to open itself to such competition. A market organisation with vertically integrated ports, that is, Service Ports, realises even lower prices and profits. However, this organisational form is not sustainable without regulation because every individual port can realise a higher profit by separating service provision from port authority in order to become a Landlord Port. © 2010 LSE and the University of Bath

Suggested Citation

  • Peran van Reeven, 2010. "The Effect of Competition on Economic Rents in Seaports," Journal of Transport Economics and Policy, University of Bath, vol. 44(1), pages 79-92, January.
  • Handle: RePEc:tpe:jtecpo:v:44:y:2010:i:1:p:79-92
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    Cited by:

    1. Yip, Tsz Leung & Liu, John Jianhua & Fu, Xiaowen & Feng, Jiejian, 2014. "Modeling the effects of competition on seaport terminal awarding," Transport Policy, Elsevier, vol. 35(C), pages 341-349.
    2. Hidalgo-Gallego, Soraya & Núñez-Sánchez, Ramón & Coto-Millán, Pablo, 2017. "Spatial non-price competition in port infrastructure services," MPRA Paper 80417, University Library of Munich, Germany.
    3. MEERSMAN, Hilde & STRANDENES, Siri Pettersen & VAN DE VOORDE, Eddy, 2014. "Port pricing: Principles, structure and models," Working Papers 2014006, University of Antwerp, Faculty of Applied Economics.
    4. Zhang, Jihua, 2016. "Quasi-landlord port financing in China: Features, practice and a contract theory analysis," Transportation Research Part A: Policy and Practice, Elsevier, vol. 89(C), pages 73-88.
    5. Xavier Fageda & Marta Gonzalez-Aregall, 2012. "“Regulation of Port Charges in Spain: Global versus Local Competition”," IREA Working Papers 201217, University of Barcelona, Research Institute of Applied Economics, revised Oct 2012.

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