Title: Optimal concession contracts for landlord port authorities to maximise fee revenues

Authors: Hsiao-Chi Chen; Shi-Miin Liu

Addresses: Department of Economics, National Taipei University, New Taipei City 23741, Taiwan ' Department of Economics, National Taipei University, New Taipei City 23741, Taiwan

Abstract: This paper analyses optimal concession contracts offered by a landlord port authority to competing operators of container terminals. The port authority pursues fee-revenue maximisation. Three contract schemes considered are fixed-fee, unit-fee, and two-part tariff. A two-stage game is constructed to characterise interactions between the port authority and two terminal operators. In the first stage, the port authority announces a contract. Then terminal operators compete for cargo amounts in the second stage. We discover that when marginal service costs of the less-efficient operator are small, the port authority would choose between the two-part tariff and the unit-fee schemes. Oppositely, the two-part tariff and the unit-fee schemes are equally preferred. Finally, if both terminal operators' efficiency is identical, the two-part tariff contract is the best.

Keywords: concession contracts; fixed fees; unit fees; landlord port authorities; sequential games; two-part tariff; container terminals; fee maximisation; fee revenues; terminal operators; cargo amounts; service costs.

DOI: 10.1504/IJSTL.2014.057810

International Journal of Shipping and Transport Logistics, 2014 Vol.6 No.1, pp.26 - 45

Received: 05 Sep 2012
Accepted: 10 May 2013
Published online: 24 May 2014 *

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