 Determining optimal transit charges: The Kiel Canal in GermanyNadine Heitmann, Katrin Rehdanz and Ulrich Schmidt No 1741, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel) Abstract: The Kiel Canal in Germany connects ports on the Baltic Sea with the rest of the world and is the most-used artificial waterway in the world. Despite this fact, it generates a balance sheet loss. Revenues, which are mainly generated by the transit charge, do not cover its operating expenses. This situation raises the question: What reforms could be made to make the canal generate a balance sheet profit? In this paper, we focus solely on the canal's revenue. Because the canal is a monopoly that allows, in principle, for perfect price discrimination, we contrast the current charging system with an optimal charging system based on the willingness-to-pay (WTP) approach. We devise a general approach to calculate optimal transit charges and apply it in a case study that includes four different ship types. We conclude that much higher revenues could be generated, on the order of between $5 and $45 million more per year and ship type if the transit charge were based not only on ship size but also on a ship's departure and destination ports. Keywords: optimal transit charge; Kiel Canal; shipping cost; Germany; price discrimination (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1741 Access Statistics for this paper More papers in Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel) Contact information at EDIRC. |
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