Optimal concession contracts for landlord port authorities with different pursuing goals

Wenqing Han, Hsiao-Chi Chen and Shi-Miin Liu

Maritime Policy & Management, 2018, vol. 45, issue 7, 893-910

Abstract: This paper investigates how landlord port authorities should offer concession contracts to their terminal operators under two different goals, by building a two-stage game for each goal. If maximizing the weighted sum of fee revenues and throughout benefits is port authorities’ goal, then the optimal concession contract can be any of the two-part tariff, the unit-fee, and the fixed-fee contracts. Accordingly, our special cases include previous works assuming that port authorities maximize either fee revenues or throughput benefits. By contrast, if maximizing the social welfare is the goal, then we find that subsidizing terminal operators, instead of charging them, is port authorities’ best choice. This result is not yet discovered in the literature.

Date: 2018
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DOI: 10.1080/03088839.2018.1479544

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