Ocean Carriers' Collusion Under Antitrust Immunity: Evidence of Asymmetric Pass-Through

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3 Citations (Scopus)

Abstract

As fuel costs are the largest component of the shipping industry's operating costs, this study examines whether ocean carriers pass fuel cost increases through to freight rates more quickly than they pass through fuel cost decreases. The focal price collusion theory suggests that such asymmetric pass-through could be a result of collusive behavior because collusion is easier to sustain when costs are falling than when costs are rising. Using a lag-adjustment model as the econometric framework, findings from this study show strong evidence for asymmetric adjustments of the US inbound freight rates in response to fuel cost changes. Such asymmetry persisted after the passage of the Ocean Shipping Reform Act of 1998. Moreover, the findings do not support the consumer search theory as an alternative explanation for the freight rate asymmetry.
Original languageEnglish
Pages (from-to)59-77
Number of pages19
JournalReview of Industrial Organization
Volume45
Issue number1
DOIs
Publication statusPublished - 1 Jan 2014

Keywords

  • Antitrust
  • Asymmetric pass-through
  • Collusion
  • Freight rates
  • Fuel costs
  • Ocean shipping

ASJC Scopus subject areas

  • Economics and Econometrics
  • Strategy and Management
  • Organizational Behavior and Human Resource Management
  • Management of Technology and Innovation

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