A Model of Partial Regulation in the Maritime Ferry Industry

Angela Bergantino, Etienne Billette de Villemeur and Annalisa Vinella

No 10, SERIES from Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro"

Abstract: In this paper, we study how maritime ferry industries should be regulated. This is a fundamental issue in so far as maritime transport between islands and mainland is a service of general interest. We argue that the policy design crucially depends on the goals the collectivity pursues (pure e¢ ciency, fairness) as well as on the relevant industry structure (monopoly, oligopoly). We show that the regulator needs to prevent ine¢ cient crowding out, whenever room exists for access of new providers to former monopolies. By properly allocating tra¢ c across shippers, the regulated firm's budget constraint can then be relaxed. We subsequently shed light on the implications of adopting the territorial continuity principle to boost social fairness. We establish that the incumbent's public service obligations dump the entrant's incentives to provide connections in the low season; conversely, soft competition encourages the entrant to operate in the high season, when it pockets a net rent. As to customers, our model predicts that the islanders, whose consumption is partly subsidized by the non-residents, patronize the incumbent and that liberalization directly benefits the non-residents who switch to the entrant.

Keywords: Maritime transport; Price and frequency; Partial regulation; Territorial (search for similar items in EconPapers)
JEL-codes: L51 L92 R48 (search for similar items in EconPapers)
Pages: 860
Date: 2006-01, Revised 2006-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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