Optimal concession contracts for landlord port authorities to maximise fee revenues
by Hsiao-Chi Chen; Shi-Miin Liu
International Journal of Shipping and Transport Logistics (IJSTL), Vol. 6, No. 1, 2014

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.

Online publication date: Sat, 24-May-2014

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