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Port Activities, Hinterland Congestion, and Optimal Government Policies The Role of Vertical Integration in Logistic Operations

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  • Bruno De Borger
  • Denis De Bruyne

Abstract

We study the implications of vertical integration in logistics and transport operations for welfare-optimal port access charges and hinterland congestion tolls. We show that, first, vertical integration of terminal operators and transport firms does not affect the optimal congestion toll rule for the hinterland, but it does imply higher optimal port access charges. Second, the government not only has an incentive to promote competition between downstream firms, it may also be beneficial to approve of vertical mergers in the logistic chain. Third, the government's failure to respond to changes in industry market structure may have large welfare effects. Fourth, both under separation and integration, optimal port fees may imply subsidies if downstream firms enjoy a high degree of market power. © 2011 LSE and the University of Bath

Suggested Citation

  • Bruno De Borger & Denis De Bruyne, 2011. "Port Activities, Hinterland Congestion, and Optimal Government Policies The Role of Vertical Integration in Logistic Operations," Journal of Transport Economics and Policy, University of Bath, vol. 45(2), pages 247-275, May.
    • Handle: RePEc:tpe:jtecpo:v:45:y:2011:i:2:p:247-275
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    1. Wang, Xinchang & Meng, Qiang, 2019. "Optimal price decisions for joint ventures between port operators and shipping lines under the congestion effect," European Journal of Operational Research, Elsevier, vol. 273(2), pages 695-707.
    2. Fan, Lei & Wilson, William W. & Dahl, Bruce, 2012. "Congestion, port expansion and spatial competition for US container imports," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(6), pages 1121-1136.
    3. Tan, Zhijia & Meng, Qiang & Wang, Fan & Kuang, Hai-bo, 2018. "Strategic integration of the inland port and shipping service for the ocean carrier," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 110(C), pages 90-109.
    4. Balliauw, Matteo, 2021. "Time to build: A real options analysis of port capacity expansion investments under uncertainty," Research in Transportation Economics, Elsevier, vol. 90(C).
    5. Xu, Fangzhou & Hanaoka, Shinya, 2021. "Effects of airport terminal competition: A vertical structure approach," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 145(C).
    6. De Borger, Bruno & Proost, Stef, 2012. "Transport policy competition between governments: A selective survey of the literature," Economics of Transportation, Elsevier, vol. 1(1), pages 35-48.
    7. Balliauw, Matteo & Kort, Peter M. & Zhang, Anming, 2019. "Capacity investment decisions of two competing ports under uncertainty: A strategic real options approach," Transportation Research Part B: Methodological, Elsevier, vol. 122(C), pages 249-264.
    8. Qu, Chenrui & Zeng, Qingcheng & Li, Kevin X. & Lin, Kun-Chin, 2020. "Modeling incentive strategies for landside integration in multimodal transport chains," Transportation Research Part A: Policy and Practice, Elsevier, vol. 137(C), pages 47-64.
    9. Göçer, Aysu & Özpeynirci, Özgür & Semiz, Meltem, 2022. "Logistics performance index-driven policy development: An application to Turkey," Transport Policy, Elsevier, vol. 124(C), pages 20-32.
    10. Sphiwe Eugene Mthembu & Mihalis Georgiou Chasomeris, 2022. "A systems approach to developing a port community system for South Africa," Journal of Shipping and Trade, Springer, vol. 7(1), pages 1-24, December.
    11. Wang, Kun & Zhang, Anming, 2018. "Climate change, natural disasters and adaptation investments: Inter- and intra-port competition and cooperation," Transportation Research Part B: Methodological, Elsevier, vol. 117(PA), pages 158-189.
    12. Amir Gharehgozli & Nima Zaerpour & Rene Koster, 2020. "Container terminal layout design: transition and future," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 22(4), pages 610-639, December.
    13. Álvarez-SanJaime, Óscar & Cantos-Sánchez, Pedro & Moner-Colonques, Rafael & Sempere-Monerris, José J., 2015. "The impact on port competition of the integration of port and inland transport services," Transportation Research Part B: Methodological, Elsevier, vol. 80(C), pages 291-302.

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