Discussion Paper
No. 2018-84 | December 12, 2018
Wei Wang, Xiujuan Liu, Lili Ding, Chen Li and Wensi Zhang
The optimal port privatization levels under inter-port competition: considering both horizontal and vertical differentiation

Abstract

The authors examine a mixed duopoly market with Cournot or Bertrand competition between a purely private port (port 1) and a partial public port (port 2). Considering both horizontal and vertical differentiation between the two ports, they analytically derive the welfare effect of privatization of port 2 and determine the optimal degree of privatization. Under Cournot or Bertrand competition, it is demonstrated that the social desirable private level of port 2 varies among full privatization, partial privatization and full nationalization, which hinges mainly upon the market size, both horizontal and vertical differentiation between the two ports and the marginal operation cost of each port. As a result, there is not necessarily a one-size-fits-all strategy for port privatization, and it is important for policymakers to consider the effects of market demand, port competition factors in port privatization.

JEL Classification:

D43, L33

Cite As

Wei Wang, Xiujuan Liu, Lili Ding, Chen Li, and Wensi Zhang (2018). The optimal port privatization levels under inter-port competition: considering both horizontal and vertical differentiation. Economics Discussion Papers, No 2018-84, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2018-84


Comments and Questions



Anonymous - Referee Report 1
December 12, 2018 - 14:36
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Anonymous - comment
January 15, 2019 - 02:19
This study contributes to the literature of port privatization study by identifying the optimal private level of partial public port in the presence of horizontal and vertical differentiation between the two public and private ports for the first time. The paper is coherently organized and the proposed propositions are elaborated thoroughly. I only have a few comments:1. Even though the characterization of "partial public port" has been proposed and considered in literature for years, doubts remain about its objective in real port operations. On page 3 line 7, there is: "a partial public one is to maximize a combined goal of public and private objective" Could you elaborate more about this objective in reality? 2. On page 3 line 7, there is:"Cui and Notteboom (2017) is notable for showing the partial privatization of the public port is social desirable in different port competition and cooperation settings." It would be appreciated that the authors could also consider the port cooperation setting in this study.
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Anonymous - Referee Report 2
January 15, 2019 - 11:54
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Anonymous - Comment
January 15, 2019 - 13:19
This paper investigated the socially optimal degree of privatization of the public port in different inter-port competition frameworks. Although the topic has been studied very well, the issue with both horizontal and vertical differentiation among competiting ports is still interesting and valuable for the thorough investigated. The authors derived the social desirable private level of partial public port depends mainly on the market size, both horizontal and vertical differentiation and the marginal operation cost. The paper can be further improved in the following two aspects: 1.Authors discussed whether and to what degree a partial public port should be privatized under traditional Cournot or Bertrand competition between one partial public port and one private port in Section 3. It is interesting. I suggest this Section can be re-organized to add a subsection. Besides of the port competition subgame, the authors should further investigate the port privatization levels in port co-operation subgame. 2.I suggest that the authors should highlight and explain why both quantity and price competitions between the two ports should be addressed in this paper.

Anonymous - Referee Report 3
January 21, 2019 - 14:32
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Anonymous - This paper can be accepted after some minor modifications
January 22, 2019 - 15:01
This paper shows an interesting result of the optimal port privatization level under public and private port competition. The analysis is comprehensive and well organized. One minor comment from this referee is that the authors should provide highlights of the objective function of service/tool (public) port, landlord port and fully private port, respectively, in order to help the readers understand the motivation of this study. Also, it would be great if the authors can provide a benchmark table in this work with other works, which would be helpful to deliver a clearly impact contribution in this research as compared to others.

Anonymous - Comment
January 28, 2019 - 11:32
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Ding, Wei, Liu, Li, Zhang - Replies to Referee Reports
February 05, 2019 - 14:32
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