Vertical integration and exclusivities in maritime freight transport

A key recent theme in maritime freight transport is the involvement of shipping lines in terminal management. Such investments are costly but allow liners to provide better service. Most of these new terminals are dedicated terminals but some are non-exclusive and let rivals access them for a fee. In this paper, we show that a shipping line that builds its own terminal finds it strategically profitable (i) to continue routing part of its cargo through the open port facilities, and (ii) to keep its terminal non-exclusive. In this way, the liner investor pushes part of the rival’s freight from the open to the new terminal. Besides, under non-exclusivities, the shipping lines offer a wider variety of services, total freight increases and the resulting equilibrium fares are higher than with a dedicated terminal.

► The paper analyzes the involvement of shipping lines in terminal management. ► The terminals can offer dedicated or non-exclusive services. ► A dedicated terminal will deviate part of its traffic through the open terminal. ► A shipping line finds it profitable to supply its terminal services to other shipping lines. ► Non-exclusive use of liner terminal enhances social welfare.