It Pays to Be Big: Price Discrimination in Maritime Shipping
CAEPR WORKING PAPER SERIES 2020-002
51 Pages Posted: 3 Mar 2020 Last revised: 22 Nov 2021
Date Written: January 29, 2020
We explore theoretically and empirically the within-route price discrimination in liner shipping and condition it on the market density. Using transaction-level data from over 200 Chilean import port-to-port routes, we confirm our theoretical predictions and demonstrate their robustness and economic significance. Quantitatively, importers in the 10th percentile pay 23% higher freight rates than importers in the 90th percentile, but only on routes with more than three carriers. Our results indicate that reducing market power distortion in the upstream sector (transportation) may amplify the informational friction distortion and price discrimination in the downstream sectors (importing industries).
Keywords: Freight Rates, Firm Size Advantage, Maritime Shipping
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