Abstract :
Australia’s principal container ports, located
in its state capitals, are owned and operated
by state authorities that largely return profits
from port operations to state governments.
Since they govern the volumes of trade in most
merchandise, they command immense influence
over the openness and flexibility of the national
economy. In this study, we estimate the elasticities
of substitution between container services
of ports in Brisbane, Sydney and Melbourne.
We also examine the pricing of port services
to estimate the extent of their interaction, from
which we derive conjectural variations parameters
to assess the actual and potential levels of
price collusion. The results confirm the conventional
wisdom that the degree of substitution between
the major east coast ports is small. While
this highlights the possibility that these ports
possess substantial market power, actual mark
ups are considerably smaller than the predicted
mark ups, suggesting that the ports’ localised
monopoly power is constrained by factors other
than price competition.
