Literature Review carried out from 14th Feb to 22nd Feb 2011

1. Port Pricing
Port pricing strategy can be based on cost factors (Heggie 1974). The study discussed that
variable cargo is priced at marginal cost pricing and fixed cargo is priced at average cost
pricing. He divided port cost in to capital cost and operational cost in order to determine
marginal and average cost. The study placed emphasis on cost based tariff and it is important
to have cost based tariff as far as port improvements are concerned as it facilitates the
prioritizing of port improvement requirements.
(Bennathan & Walters 1979) in their book "Port pricing and investment policy for
developing countries" mentioned that the efficient operation of a port requires its ports
authorities to levy prices that are based on short-run marginal cost. This implies that when the
demand for port facilities is persistently high and there is a possible port congestion, the
authority should raise the tariff by adding a congestion charge and when demand gets lower
relative to available port capacity, the authorities should use two-part tariffs to promote more
traffic.

(Unspecified 1997) European Union (EU) Green Paper on sea port pricing places emphasis
on the fact that port users should bear the real cost of the port services and facilities they
consume. This proposition is resulted due to the present nature of port infrastructure
financing which is through public funding. Accordingly it implies, from consumer point of
view that the incurred cost by port users would eventually be transferred to the commodity
prices through freight rate and at the final selling point the final consumer bears the larger
proportion of cost. Thus, it is highly required to arrive at a general consensus that the burden
of port tariff should be distributed among the all stakeholders participate in the affair. The
Green paper further envisaged that any pricing model of port tariff should be based on the
principal of cost recovery of new investments, operating cost, and external cost of the
production of port services. This ensure that new investments on port sector are demand
driven and in turn it will allow a fair competition among ports.
EU Green Paper elaborates port pricing as an economic problem and the solution therefore
lies with the economic theory itself. It also elaborates on the requirement of an adequate
pricing system for ports and port services in order to improve the efficiency of ports and
ensure free and fair competition in the port industry.
A literature review on port related studies has been undertaken by (Pallis,Vitsounis & De
Langen 2010) distinctively split port research subfields. Of them, port pricing is itemized
under port policy and regulation. According to the review there about 67 research papers have
carried out and completed on port policy and regulation covering Port pricing, state aid, and
national policy environmental, safety & security regulations in ports, anti-trust regulation;
issues in ports, supranational port policies during the period from 1997 to 2008.

(Pinto et al. 2010) studied the pricing of pilotage services in Brazilian ports and suggested
that the provision of pilotage services must be regulated if they are operating within an
informal economy. The study compares the pilotage service cost of major 35 ports which
covered data such as pilotage price, distance and time spent on the maneuvers for a 3000
TEU containership. The study concluded with the finding that the prices charged by Brazilian
ports are well above i.e.2.2 times, the average of all the international ports in the sample.
(Meersman 2002) in his study on port pricing issues quoted a study by (Marlow 2000) shows
that pricing by ports and port operators are historically determined and take palace in a
complex and an opaque manner.
(Ashar 2001) revealed that newly privatized ports are looking for setting prices by assessing
the strategic environment within which they operate. The assessment of the strategic
environment, according to him, comprises of structure of the port in principal and the
intermediary parties, existing flow of services and charges, price differentiation and
discrimination in the market for port services, the concentration of the demand and supply
for ports and the competitive and cooperative behaviour of the market. As the methodology
for setting the price two novel diagnostic tools were employed; a change flow diagram for
analysing the allocation of port charges for principal and intermediary parties and a game tree
for analysing the port competitors action and reaction dynamics of oligopolistic market.
A study by (Strandenes & Marlow 2000) also quoted the EU Green Paper and expressed the
same opinion and in a context of the demand for port is inelastic, the situation would be
severe.
(Perez-Labajos & Garcia 2000) introduced a novel approach to sea port pricing bringing a
methodology for determining efficient tariffs for the services provided by commercial ports.
The model determines the efficient unit profit of the services offered and their sensitivity
which are useful for the port authority to take actions on the tariff levels and variable cost in
order to optimize the economic benefits.

Research topics
1.
2.
3.
4.

Regulation of the pricing of different seaport services

The evolution of port pricing practices in commercial sea port operation.
Investigation on charging practices of container ports
Investigation on public finance composition in carrying out commercial
operations in seaports

2. Supranational Port Policies

Competition among sea ports has been a major research area in port economics and from
economic point of view, it is a sound principal. (Donselaar & Kolkman 2010) stated that
cooperation between sea port authorities offers possibilities of counteracting detrimental
effects of port competition and provides a prospectus to improve efficiency. Nevertheless the
focal point the study has not considered is that the welfare loss due to enhanced competition
that can be generated from regional ports not taking part in the cooperation. As an addition to
the research which may lead to over all welfare of the region, the possibilities need to be
explored beyond cooperation among port authorities. This provides directives to look at the
maritime operation of a given region with a holistic approach not only by amalgamating port
authorities role and operations but also by consolidating regional port traffic by way of
creating a regional hub port connected with an efficient feeder port network from which there
can be substantial welfare gains to the society through productivity and efficiency
enhancement within the ports and the network of shipping routes and ports collaborated in the
"hub port cooperation".
(Grosso et al. 2010) carried out a study on short sea shipping revealed that the pricing policy
for short sea haul varies according to destination and type of goods transported. Hence
participating in hub port cooperation would facilitate streamlining a fair pricing policy for short
sea shipping market since the movement of cargo in a hub port cooperation takes place via the
shortest route network. On the other hand hub port cooperation would facilitate and enhance the
operation of global liner shipping market by providing a large volume of cargo traffic. A study by
(Wilmsmeier & Notteboom 2009) supports both the creation of a hub port and benefits of
operating as a feeder port. The study researched the evolution of maritime networks in and
between two differently developed regions and concluded that the liner shipping network reflects
the strategic tradeoffs between market size and market coverage. Hub ports will develop where
economies of scale in port calls to individual ports cannot be realized by calling individual ports.
Thus individual ports whose maritime connectivity to shipping net work and hinterland land
connectivity to ports is lack can enhance its productivity by participation of the hub port
cooperation. This argument can be supported by the research outcome of (Rodrigue &
Notteboom 2010) in which it is concluded that the evolution of the roles and functions of
intermediary seaport hubs has created a process of foreland based regionalization i.e. integration
of intermediary shipping hubs with regional shipping networks. Therefore on one hand this
process has ensured greater traffic stability at the intermediary hubs making smaller feeder ports
to have access to liner shipping market and global shipping networks and on the other hand it
secures the liner shipping market from the risk of low volumes (under capacity) that would be
resulted due to deficient demand situations such as financial recessions.

Research Topic
Optimization of regional maritime network by creating a hub port through strategic
cooperation among regional seaports.

Ashar, A. 2001, 'Strategic Pricing in Newly Privatised Ports', International Journal of

Maritime Economics, vol. 3, no. 1, pp. 52-78.
Bennathan, E. & Walters, A. A. 1979, Port pricing and investment policy for developing
countries, Oxford University Press; New York (USA).
Donselaar, P. W.-V. & Kolkman, J. 2010, 'Societal costs and benefits of cooperation between
port authorities', Maritime Policy & Management: The flagship journal of
international shipping and port research, vol. 37, no. 3, pp. 271-284.
Grosso, M., Lynce, A.-R., Silla, A. & Vaggelas, G. K. 2010, 'Short Sea Shipping,
intermodality and parameters influencing pricing policies: the Mediterranean case',
Netnomics, vol. 11, no. 1, pp. 47-67.
Heggie, I. G. 1974, 'Charging for Port Facilities', Journal of Transport Economics and Policy,
vol. 8, no. 1, pp. 3-25.
Meersman, H., Van de Voorde, E.,Vanelslander, T. 2002, 'PORT PRICING ISSUES Considerations on Economic Principles, Competition and Wishful Thinking
', second seminar of the IMPRINT-EUROPE Thematic Network:Implementing Reform on
Transport Pricing: Identifying Mode-Specific issues, Brussels, 14th/15th May,
Pallis, A. A., Vitsounis, T. K. & De Langen, P. W. 2010, 'Port Economics, Policy and
Management: Review of an Emerging Research Field', Transport Reviews: A
Transnational Transdisciplinary Journal, vol. 30, no. 1, pp. 115 - 161.
Perez-Labajos, C. & Garcia, J. E. 2000, 'Efficient Port Pricing: A New Methodology Applied
to Spanish Commercial Ports', IJME, vol. 2, no. 2, pp. 141-160.
Pinto, M. M. O., Goldberg, D. J. K., Stupello, B. & Haley, C. W. 2010, 'Regulation and price
setting of pilotage services in Brazil', Maritime Economics & Logistics, vol. 12, no. 4,
p. 430.
Rodrigue, J.-P. & Notteboom, T. 2010, 'Foreland-Based Regionalization: Integrating
Intermediate Hubs with Port Hinterlands', Research in Transportation Economics, vol.
27, pp. 19-29.
Strandenes, S. P. & Marlow, P. B. 2000, 'PORT PRICING AND COMPETITIVENESS IN
SHORT SEA SHIPPING', International Journal of Transport Economics vol. Volume:
27, no. Issue Number: 3, pp. 315-334.
UNSPECIFIED 1997, 'Green Paper on Sea Ports and Maritime Infrastructure. COM (97) 678
final, 10 December 1997', in, p. 41.
Wilmsmeier, G. & Notteboom, T. 2009, 'Determinants of Liner Shipping Network
Configuration: A two Region Comparison', 2009 Anual Conference of the
International Association of Maritime Economists (IAME 2009),