Port Competition: The Chain Approach

The traditional view on port competition considers only the horizontal structure of this sector, in which interaction between ports can be explained by oligopolistic models. The current study examines interaction between ports under both horizontal and vertical structures, under which two types of interactive behaviour, competition and coopetition coexist; although the analysis presented in the study refers to ports, its results are also applicable to other sectors in the transport industry, where chains exist. The mono-line chain structure is first considered to derive the basic properties of coopetition and then extended to incorporate competition. The study shows that chain service providers tend to increase the price to a level even higher than monopoly price causing allocative inefficiency in transport/logistics chains that has not been identified in the literature. This chain effect also impacts on equilibrium outcome and competition between the chains in a transport/logistics network. It concludes that interaction between service providers in a transport/logistics network is represented by competition between its chains and coopetition within each chain. The policy and management implications are also discussed.