Title
Private port pricing and public investment in port and hinterland capacity Private port pricing and public investment in port and hinterland capacity
Author
Faculty/Department
Faculty of Applied Economics
Publication type
article
Publication
London ,
Subject
Economics
Source (journal)
Journal of transport economics and policy. - London, 1967, currens
Volume/pages
42(2008) :3 , p. 527-561
ISSN
0022-5258
1754-5951
ISI
000260150800007
Carrier
E
Target language
English (eng)
Affiliation
University of Antwerp
Abstract
We study duopolistic pricing by ports that are congestible, share the same overseas customers and have each a downstream, congestible transport network to a common hinterland. In the central set-up, local (country) governments care about local welfare only and decide on the capacity of the port and of the hinterland network. We obtain the following results. First, profit-maximising ports internalise hinterland congestion in as far as it affects their customers. Second, investment in port capacity reduces prices and congestion at each port, but increases hinterland congestion in the region where the port investment is made. Investment in a port's hinterland is likely to lead to more port congestion and higher prices for port use, and to less congestion and a lower price at the competing port. Third, the induced increase in hinterland congestion is a substantial cost of port investment that strongly reduces the direct benefits of extra port activities. Fourth, imposing congestion tolls on the hinterland road network raises both port and hinterland capacity investments. We illustrate all results numerically and discuss policy implications.
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