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

Nguyen, Hong-Oanh; Chin, Anthony; Tongzon, Jose; Bandara, Mahinda

Authors

Hong-Oanh Nguyen

Anthony Chin

Jose Tongzon



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.

Journal Article Type Article
Online Publication Date Sep 28, 2016
Publication Date 2016-09
Deposit Date Dec 4, 2021
Journal Maritime Economics & Logistics
Print ISSN 1479-2931
Electronic ISSN 1479-294X
Publisher Palgrave Macmillan
Peer Reviewed Peer Reviewed
Volume 18
Pages 264-281
DOI https://doi.org/10.1057/mel.2015.9
Keywords port pricing, port competition, port networks, simultaneous equation modelling, transport policy, Australia
Public URL http://researchrepository.napier.ac.uk/Output/2824436