|Port activities, hinterland congestion, and optimal government policies: the role of vertical integration in logistic operations|
De Borger, B.; De Bruyne, D. (2011). Port activities, hinterland congestion, and optimal government policies: the role of vertical integration in logistic operations. J. Transp. Econ. Policy 45(2): 247-275
In: Journal of Transport Economics and Policy. London School of Economics and Political Science: London. ISSN 0022-5258, more
We study the implications of vertical integration in logistics and transport operations for welfare-optimal port access charges and hinterland congestion tolls. We show that, first, vertical integration of terminal operators and transport firms does not affect the optimal congestion toll rule for the hinterland, but it does imply higher optimal port access charges. Second, the government not only has an incentive to promote competition between downstream firms, it may also be beneficial to approve of vertical mergers in the logistic chain. Third, the government's failure to respond to changes in industry market structure may have large welfare effects. Fourth, both under separation and integration, optimal port fees may imply subsidies if downstream firms enjoy a high degree of market power.