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Strategic Interaction amongst Australia's East Coast Ports
Author(s) -
Menezes Flavio M.,
Pracz Marcin,
Tyers Rod
Publication year - 2007
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/j.1467-8462.2007.00451.x
Subject(s) - monopoly , port (circuit theory) , openness to experience , competition (biology) , business , state (computer science) , container (type theory) , flexibility (engineering) , collusion , industrial organization , east coast , economics , market economy , engineering , geography , computer science , mechanical engineering , psychology , social psychology , ecology , management , algorithm , electrical engineering , biology , physical geography
Australia's principal container ports, located in its state capitals, are owned and operated by state authorities that largely return profits from port operations to state governments. Since they govern the volumes of trade in most merchandise, they command immense influence over the openness and flexibility of the national economy. In this study, we estimate the elasticities of substitution between container services of ports in Brisbane, Sydney and Melbourne. We also examine the pricing of port services to estimate the extent of their interaction, from which we derive conjectural variations parameters to assess the actual and potential levels of price collusion. The results confirm the conventional wisdom that the degree of substitution between the major east coast ports is small. While this highlights the possibility that these ports possess substantial market power, actual mark ups are considerably smaller than the predicted mark ups, suggesting that the ports' localised monopoly power is constrained by factors other than price competition.