Private port pricing and public investment in port and hinterland capacity

Bruno De Borger, Stef Proost and Kurt van Dender

Working Papers from University of Antwerp, Faculty of Business and Economics

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-maximizing ports internalize hinterland congestion in as far as it affects their customers. Second, investment in port capacity reduces prices and congestion at both ports, 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.

Keywords: Port pricing; Congestion; Investment; Cost benefit rules (search for similar items in EconPapers)
JEL-codes: H71 L92 R4 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2007-10
New Economics Papers: this item is included in nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Private Port Pricing and Public Investment in Port and Hinterland Capacity (2008)
Working Paper: Private port pricing and public investment in port and Hinterland capacity (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ant:wpaper:2007019

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