Urban road congestion and seaport competition

This paper examines the interaction between urban road congestion and competition between two seaports. We find that an increase in road capacity or increasing tolls by a chain may increase its port's profit and reduce the rival port's profit. As a consequence, roads are tolled above the marginal external congestion costs, provided that the value-of-time of shippers is sufficiently large relative to that of commuters. When a discriminative toll system is implemented, commuters are tolled at the marginal external congestion costs while truck tolls are much lower. The case of ports' maximising welfare is examined, and the results compared with those of price competition.