Edited by André de Palma, Robin Lindsey, Emile Quinet and Roger Vickerman
Chapter 36: Competition and Regulation in Seaports
Hilde Meersman, Eddy Van de Voorde and Thierry Vanelslander INTRODUCTION Port competition, especially at the level of freight handling, has become an important topic in transport economics. This is due not only to the enormous volumes of freight involved, but also to derived effects, including in relation to employment and investments. Port competition unfolds at various levels. Within a given country, ports may compete for freight flows as well as for investment in additional infrastructure. Within a port cluster, they may vie for the same hinterland. And between port ranges, there is growing competition for investments and traffic.1 Port competition is a fascinating and complex phenomenon, not in the least because of the international nature of the goodshandling groups involved. In general, competition is good for society resulting in lower prices, more output and better services. However, in the presence of economies of scale and scope, production by a single firm will lead to lower average costs than production by many, smaller companies. This natural monopoly can result in an abuse of market power because the monopolist can realize additional profits by raising the price and reducing the output. To avoid this abuse of market power, the regulator can intervene by designing mechanisms which will prevent the monopolist taking advantage of his dominance. Regulation makes sense in the case of market failure, when there is a natural monopoly, and when it can improve sector performance. This implies that the consumer surplus will go up, production will be more cost-efficient, the...
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