IDEAS home Printed from https://ideas.repec.org/a/pal/marecl/v5y2003i2p100-115.html
   My bibliography  Save this article

Excess Capacity and Entry Deterrence: The Case of Ocean Liner Shipping Markets

Author

Listed:
  • Mike Fusillo

    (Director, PIERS Maritime Research Servicer 33 Washington St. Newark, NJ 07102, And Adjunct Assistant Prof. New York University.)

Abstract

This paper attempts to shed light on the proposal that firms in concentrated industries may keep excess capacity to forestall entry or expansion by rivals. Excess capacity can deter entry by forming expectations on the part of potential entrants that dominant firms are capable of responding aggressively to threats. But in order to make a convincing case for excess capacity as a strategic entry deterrent, all potential sources of excess capacity must be considered simultaneously. These may include industry-specific structural factors, such as the divisibility of demand relative to supply, economies of scale or wide swings in demand. Ocean liner shipping exhibits structural factors that have led excess capacity for much of its history. It is a concentrated industry that until the late 1990s was dominated by price fixing industry groups known as liner shipping conferences. In spite of limited antitrust immunity granted by most governments to liner shipping conferences, excess capacity is and has been a persistent problem that could be a major cause of operational inefficiencies. As such, ocean liner shipping presents an ideal forum in which to distinguish between excess capacity that is an artefact of structural conditions of supply and demand and excess capacity that may be deployed as a strategic defense against opportunistic rivals. The results of a random effects model with instrumental variables show some limited support for the entry deterrence element of excess capacity in liner shipping. Maritime Economics & Logistics (2003) 5, 100–115. doi:10.1057/palgrave.mel.9100074

Suggested Citation

  • Mike Fusillo, 2003. "Excess Capacity and Entry Deterrence: The Case of Ocean Liner Shipping Markets," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 5(2), pages 100-115, June.
  • Handle: RePEc:pal:marecl:v:5:y:2003:i:2:p:100-115
    as

    Download full text from publisher

    File URL: http://www.palgrave-journals.com/mel/journal/v5/n2/pdf/9100074a.pdf
    File Function: Link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: http://www.palgrave-journals.com/mel/journal/v5/n2/full/9100074a.html
    File Function: Link to full text HTML
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Takuma Matsuda & Suguru Otani, 2022. "Unified Container Shipping Industry Data From 1966: Freight Rate, Shipping Quantity, Newbuilding, Secondhand, and Scrap Price," Papers 2211.16292, arXiv.org, revised Apr 2023.
    2. Suguru Otani, 2024. "Industry Dynamics with Cartels: The Case of the Container Shipping Industry," Papers 2407.15147, arXiv.org.
    3. Rajesh, R. & Pugazhendhi, S. & Ganesh, K. & Ducq, Yves & Lenny Koh, S.C., 2012. "Generic balanced scorecard framework for third party logistics service provider," International Journal of Production Economics, Elsevier, vol. 140(1), pages 269-282.
    4. Suguru Otani, 2024. "Industry Dynamics with Cartels: The Case of the Container Shipping Industry," Discussion Paper Series DP2024-28, Research Institute for Economics & Business Administration, Kobe University.
    5. repec:spo:wpecon:info:hdl:2441/7o52iohb7k6srk09mit038srm is not listed on IDEAS
    6. repec:hal:wpspec:info:hdl:2441/7o52iohb7k6srk09mit038srm is not listed on IDEAS
    7. Dong, Quan & Bárcena-Ruiz, Juan Carlos, 2015. "Does investment in capacity encourage FDI?," Economic Modelling, Elsevier, vol. 51(C), pages 58-64.
    8. Wang, Fan & Zhuo, Xiaopo & Niu, Baozhuang & He, Jiayi, 2017. "Who canvasses for cargos? Incentive analysis and channel structure in a shipping supply chain," Transportation Research Part B: Methodological, Elsevier, vol. 97(C), pages 78-101.
    9. Wang, Junjin & Liu, Jiaguo & Wang, Fan & Yue, Xiaohang, 2021. "Blockchain technology for port logistics capability: Exclusive or sharing," Transportation Research Part B: Methodological, Elsevier, vol. 149(C), pages 347-392.
    10. Robin Henderson & Ralitsa Mihaylova & Paul Oman, 2019. "A dual frailty model for lifetime analysis in maritime transportation," Lifetime Data Analysis: An International Journal Devoted to Statistical Methods and Applications for Time-to-Event Data, Springer, vol. 25(4), pages 739-756, October.
    11. repec:hal:spmain:info:hdl:2441/7o52iohb7k6srk09mit038srm is not listed on IDEAS
    12. Liu, Jiaguo & Wang, Junjin, 2019. "Carrier alliance incentive analysis and coordination in a maritime transport chain based on service competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 128(C), pages 333-355.
    13. Ying Kou & Meifeng Luo, 2016. "Strategic capacity competition and overcapacity in shipping," Maritime Policy & Management, Taylor & Francis Journals, vol. 43(4), pages 389-406, May.
    14. Wang, Hua & Meng, Qiang & Zhang, Xiaoning, 2014. "Game-theoretical models for competition analysis in a new emerging liner container shipping market," Transportation Research Part B: Methodological, Elsevier, vol. 70(C), pages 201-227.
    15. Wu, Wei-Ming, 2009. "An approach for measuring the optimal fleet capacity: Evidence from the container shipping lines in Taiwan," International Journal of Production Economics, Elsevier, vol. 122(1), pages 118-126, November.
    16. Wu, Wei-Ming & Huang, Deng-Shing, 2018. "Modelling the profitability of container shipping lines: Theory and empirical evidence," Transport Policy, Elsevier, vol. 72(C), pages 159-170.
    17. Productivity Commission, 2005. "Review of Part X of the Trade Practices Act 1974: International Liner Cargo Shipping," Inquiry Reports, Productivity Commission, Government of Australia, number 32.
    18. repec:spo:wpmain:info:hdl:2441/7o52iohb7k6srk09mit038srm is not listed on IDEAS
    19. Fabien Bertho, 2012. "The impact of liner shipping trade and competition regulations on the market structure, maritime transport costs and seaborne trade flows [Les réglementations commerciales et concurrentielles dans ," SciencePo Working papers Main tel-03675986, HAL.
    20. Delu Wang & Xun Xue & Yadong Wang, 2021. "Overcapacity Risk of China’s Coal Power Industry: A Comprehensive Assessment and Driving Factors," Sustainability, MDPI, vol. 13(3), pages 1-21, January.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:marecl:v:5:y:2003:i:2:p:100-115. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.