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Title:Determining optimal transit charges: The Kiel Canal in Germany PDF Logo
Authors:Heitmann, Nadine
Rehdanz, Katrin
Schmidt, Ulrich
Issue Date:2011
Series/Report no.:Kiel Working Papers 1741
Abstract:The Kiel Canal in Germany connects ports on the Baltic Sea with the rest of the world and is the most-used artificial waterway in the world. Despite this fact, it generates a balance sheet loss. Revenues, which are mainly generated by the transit charge, do not cover its operating expenses. This situation raises the question: What reforms could be made to make the canal generate a balance sheet profit? In this paper, we focus solely on the canal's revenue. Because the canal is a monopoly that allows, in principle, for perfect price discrimination, we contrast the current charging system with an optimal charging system based on the willingness-to-pay (WTP) approach. We devise a general approach to calculate optimal transit charges and apply it in a case study that includes four different ship types. We conclude that much higher revenues could be generated, on the order of between $5 and $45 million more per year and ship type if the transit charge were based not only on ship size but also on a ship's departure and destination ports.
Subjects:optimal transit charge
Kiel Canal
shipping cost
Germany
price discrimination
JEL:R48
L92
Document Type:Working Paper
Appears in Collections:Kieler Arbeitspapiere, IfW
Publikationen von Forscherinnen und Forschern des IfW

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