Port Privatization in an International Oligopoly
31 Pages Posted: 15 Feb 2013
Date Written: February 10, 2013
We investigate how port privatization affects port charges, firm profits, and welfare. Our model consists of an international duopoly with two ports and two markets. When the unit transport cost is large, privatization of ports decreases the prices for port usage, although neither government has an incentive to privatize its port. The equilibrium governmental decisions are inconsistent with the desirable outcome if the unit transport cost is not large enough. The smaller country’s government is more likely to privatize its port, although the larger country’s government is more likely to nationalize its port to protect its domestic market.
Keywords: Port Privatization, Port charge, Oligopoly, Strategic trade policy
JEL Classification: L33, F12, R48, F13
Suggested Citation: Suggested Citation