Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/92972
Authors: 
Czerny, Achim
Höffler, Felix
Mun, Se-il
Year of Publication: 
2013
Series/Report no.: 
EWI Working Paper 13/13
Abstract: 
Private operation of port facilities is becoming increasingly common worldwide and many governments consider the privatization of public ports as a policy option. We investigate the effect of port privatization in a setting with two ports located in different countries, serving their home market but also competing for transshipment traffic from a third region. Each government chooses whether to privatize its port or to keep port operations public. We show that there exist equilibria in which the two governments choose privatization. In these equilibria, national welfare is higher relative to a situation where both ports are public. Since port charges are strategic complements, privatization can act as a valuable precommitment tool for the two governments and allows for a better exploitation of the third region. However, from the perspective of maximizing the joint national welfare of both port countries, there is an inefficiently low incentive to privatize. It is also shown that a country with a smaller home market has a larger incentive to choose private port operation.
Subjects: 
Regulation
commitment
capacity markets
transmission system investment
JEL: 
L11
L90
L98
Document Type: 
Working Paper

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