Optimal concession contracts for landlord port authorities to maximize fee revenues with minimal throughput requirements

Abstract

This paper investigates optimal concession contracts offered by a landlord port authority to competing terminal operators given minimum throughput requirements. Three contract types considered are fixed-fee, unit-fee, and two-part tariff. We find that the unit-fee contract is always the best, and the port authority becomes better off by imposing minimum throughput requirements. These results remain true when demands for and/or costs of port’s services are uncertain, when terminal operators compete in service prices, when operators’ congestion costs are considered under specific conditions, when dissimilar contracts are offered to different operators, or when there are more than two operators.