Very few studies focus on the impact of competition on port efficiency. However, it can be assumed that a port in a monopolistic situation is subject to less pressure from customers and might be less efficient. Conversely, a port subject to high competition may be forced to overinvest in order to provide a higher quality of service to customers.
The recent study of PortEconomics member Pierre Cariou, along with Gabriel Figueiredo de Oliveira (University of Toulon, LEAD, Université du Sud Toulon-Var, Faculté de Sciences Economiques et de Gestion) assesses such assumptions, using an order-α efficiency method on 234 container terminals in 2007 (first step), followed by a truncated bootstrapped regression (second step). Results on determinants of efficiency scores conclude that traditional variables such as the size of the port city, whether a port is a major gateway, and the level of connectivity of the country where the port is located, have a positive impact on efficiency scores. Estimates also stress that the level of inter-port competition reduces efficiency, a result which, to the best of our knowledge, has not yet been identified in literature. This result tends to confirm that competition may lead to over-investment and to a decrease in efficiency.
The study titled The impact of competition on container port (in)efficiency”and presented during the annual conference of the International Association of Maritime Economists – IAME 2014, that was held in Norfolk, Virginia, USA.
You may freely download the paper @PortEconomics.