Marginal Cost Pricing in Seaports

Abstract

There is a great deal of inconsistency in relation to port charging practices. Some port charges are of a discriminatory nature, and can serve to restrict the level of international trade. For example, in seaport charging there appears to be no relationship between the level of cargo dues and port costs. Cargo dues are nothing more than a tax levied on the movement of goods through ports, and such taxes generally do not apply to other, often competing, transport modes (eg long distance trucking). Such charges reflect the monopoly power of a port. However, in a changing environment, consolidation amongst major shipping lines and terminal operators means that the largest firms and alliances can now influence changes in port pricing. Yet, it is inevitable that many other port users remain unable to exert such influence. Nevertheless, in this new environment there do seem to be increased opportunities to reform port pricing. A port authority can benefit, for example, through receipt of secure long term income from renting out of port concessions, although a concern must always be to ensure markets remain contestable. As well as advocating a change to port pricing practices, the authors redefine marginal costs to take account of differences in the timing of port investments.