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Private port pricing an public investment in port and hinterland capacity
De Borger, B.; Proost, S.; Van Dender, K. (2008). Private port pricing an public investment in port and hinterland capacity. J. Transp. Econ. Policy 42(3): 527-561
In: Journal of Transport Economics and Policy. London School of Economics and Political Science: London. ISSN 0022-5258, more
Peer reviewed article  

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  • De Borger, B., more
  • Proost, S.
  • Van Dender, K.

    We study duopolistic pricing by ports that are congestible, share the same overseas customers and have each a downstream, congestible transport network to a common hinterland. In the central set-up, local (country) governments care about local welfare only and decide on the capacity of the port and of the hinterland network. We obtain the following results. First, profit-maximising ports internalise hinterland congestion in as far as it affects their customers. Second, investment in port capacity reduces prices and congestion at each port, but increases hinterland congestion in the region where the port investment is made. Investment in a port's hinterland is likely to lead to more port congestion and higher prices for port use, and to less congestion and a lower price at the competing port. Third, the induced increase in hinterland congestion is a substantial cost of port investment that strongly reduces the direct benefits of extra port activities. Fourth, imposing congestion tolls on the hinterland road network raises both port and hinterland capacity investments. We illustrate all results numerically and discuss policy implications.

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