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The pricing behavior of ocean liner conferences
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|Title:||The pricing behavior of ocean liner conferences|
Shipping -- Rates
|Abstract:||One of the major complaints about the liner conference system has been that conferences are cartels collectively setting prices to maximize their profits. The complaint centers around the pricing behavior that has caused inefficiency and involved the misallocation of resources. A number of models have been offered to explain the conference pricing behavior. These include neo-classical models based upon the profit-maximization hypothesis and alternative model, Unfortunately, few of these models have been satisfactory. Overall, they fail to satisfactorily consider multi-product shipping services and take into account the quality of services as well as non-conference competition. Following the current state-of-the-art, this study has developed a fully-specified model considering the price interrelationships between the conference and non-conference sectors. However, simplified assumptions are necessary because the information necessary for the test of this model is not always readily available. Two simplified models are developed in this study. One is the dominant-firm price-leadership model which considers the market residual demand as a constraint and the other one is the price-constrained model which assumes that the non-conference competition puts a ceiling on the conference freight rates. The latter consists of a two-equation system. The "first equation" is for the situation where the conference does not face strong competition and acts as a price-maker while the "second equation" where it does and acts as a price-taker. This model has confirmed that the inelastic demand for the conference transport services can not be an evidence rejecting the profit-maximization hypothesis as long as the quality of services is one of the decision variables of the conference. In the meantime, the conference "value-of- service" pricing practice is also consistent with the competitive market situation. The empirical test of these simplified models using regression analysis based upon the data pertaining to the Latin American exports shows the structure of the conference freight rates is consistent with either the price-leadership model or the price-constrained model. The conference acts as a price-maker or price-leader for the high-value commodities and as a price-taker for the low-value ones.|
Bibliography: leaves 104-119.
[ix], 119 leaves, bound ill. 29 cm
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|Appears in Collections:||Ph.D. - Economics|
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