The positive externality of port calling

Abstract

This paper considers the problem of externality from additional port calling at New Port in Busan Container Port. This externality topic differs from the conventional literature on the externality of transportation, in that the latter focuses on environmental issues but the former deals with the problem of noncorrespondence of cost-bearing subjects. Inter alia, this paper highlights that, owing to the big gap between the bargaining powers of involved economic agents (i.e. ocean-going companies and short-sea container shipping companies), the transaction cost would be too high to reach an agreement with mutual benefits and thus that the port authorities, especially Busan Port Authority among them, should implement the policy to subsidize the short-sea container shipping companies in order for the externality problem to be resolved. Furthermore, this paper shows the expected effects from the internalization of this externality.