Maritime Economics & Logistics

, Volume 18, Issue 3, pp 264–281 | Cite as

Analysis of strategic pricing in the port sector: The network approach

  • Hong-Oanh Nguyen
  • Anthony Chin
  • Jose Tongzon
  • Mahinda Bandara
Original Article

Abstract

This article demonstrates how interaction between ports in a network can be analysed in two stages. The first stage is the analysis of the price response functions and it examines how a port sets its prices for infrastructure services given those of its competitors. The second stage involves the identification of network relationships and analyses strategic interactions based on the results obtained from the first stage. The procedure is applied to analyse the network relationships between ports in three regions in Australia, namely Queensland, South Australia and Victoria, and Western Australia. The results provide insights into strategic interactions in port networks not previously seen in the literature. Especially, it has been found that, while some ports appear to strategically interact with each other in price setting, other ports prefer to set their own prices independently of each other. Moreover, strategic pricing can be asymmetric rather than symmetric. The result of our analysis has important implications for port management and policymakers. For example, while the existence of ‘complementary’ strategic pricing may not be seen as evidence of price leadership, it indicates that port users may not be able to shop around among competing ports if the existing port increases its prices.

Keywords

port pricing port competition port networks simultaneous equation modelling transport policy Australia 

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Copyright information

© Macmillan Publishers Ltd 2016

Authors and Affiliations

  • Hong-Oanh Nguyen
    • 1
  • Anthony Chin
    • 2
  • Jose Tongzon
    • 3
  • Mahinda Bandara
    • 4
  1. 1.Department of Maritime and Logistics Management, National Centre for Ports and Shipping, Australian Maritime College, University of TasmaniaLauncestonAustralia
  2. 2.Department of Economics, National University of SingaporeSingaporeSingapore
  3. 3.Graduate School of Logistics, Inha UniversityNam-gu, IncheonSouth Korea
  4. 4.Department of Transport and Logistics Management, University of MoratuwaBandaranayake Mawatha, Katubedda, MoratuwaSri Lanka

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