Internalization of port congestion: strategic effect behind shipping line delays and implications for terminal charges and investment

Changmin Jiang, Yulai Wan, Anming Zhang

Research output: Journal article publicationJournal articleAcademic researchpeer-review

44 Citations (Scopus)

Abstract

This paper develops a theoretical model to analyze the congestion internalization of the shipping lines, taking into account the ‘knock on’ effect (i.e. the congestion delay passed on from one port-of-call to the next port-of-call). We find that with the presence of the knock-on effect, liners will operate less in terminals, and an increase of a liner’s operation in one terminal will decrease its operation in the other. If the liners are involved in a Stackelberg competition, whether they operate more or less in a terminal under the knock-on effect depends on the comparison between the marginal congestion costs of terminals. Furthermore, we find that the coordinated profit-maximizing terminal charges are higher than both the socially optimal terminal charges and the independent profit-maximizing terminal charges. When the knock-on effect is small, the independent profit-maximizing terminal charges are set at higher levels than the socially optimal terminal charges; but when the knock-on effect is sufficiently large, this relationship may reverse. Besides, the capacity investment rules are the same for welfare-maximizing terminal operator and coordinated profit-maximizing terminal operator, while independent profit-maximizing terminal operators invest less in capacity. The larger the knock-on effect, the larger this discrepancy.
Original languageEnglish
Pages (from-to)112-130
Number of pages19
JournalMaritime Policy and Management
Volume44
Issue number1
DOIs
Publication statusPublished - 2 Jan 2017

Keywords

  • internalization
  • knock-on effect
  • Port congestion
  • shipping line
  • terminal charge
  • terminal investment

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Transportation
  • Ocean Engineering
  • Management, Monitoring, Policy and Law

Fingerprint

Dive into the research topics of 'Internalization of port congestion: strategic effect behind shipping line delays and implications for terminal charges and investment'. Together they form a unique fingerprint.

Cite this