It Pays to be big: Price discrimination in maritime shipping

Adina Ardelean and Volodymyr Lugovskyy

European Economic Review, 2023, vol. 153, issue C

Abstract: We explore theoretically and empirically the within-route price discrimination in liner shipping and condition it on the market density. Our simple model with informational frictions predicts carrier price discrimination against smaller importing firms under the condition that the number of available carriers on the route is sufficiently large. Using transaction-level data from over 200 Chilean import port-to-port routes, we confirm our theoretical predictions and demonstrate their robustness and economic significance. Ranked by their annual importing size, importers in the 10th percentile pay 18% higher freight rates than importers in the 90th percentile, but only on routes with more than three carriers. Our results indicate that reducing market power distortion in the upstream sector (transportation) may amplify the informational friction distortion and price discrimination in the downstream sectors (importing industries).

Keywords: International trade costs; Freight rate; Firm size advantage; Maritime shipping (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:153:y:2023:i:c:s0014292123000326

DOI: 10.1016/j.euroecorev.2023.104403

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