A Tale of Two Ports

This paper examines how two geographically separated ports compete for a market consisting of manufacturing firms located between the two ports. There is a firm in each port, and these two firms, taking the infrastructure provided by their governments as given, compete in a Bertrand sense. The governments, however, can also compete in terms of investment in infrastructure. This paper shows that there are cases in which both the firm and the government in the port that has a longer history in the market may have the first mover advantage. In particular, the government can provide a credible threat by overinvesting in infrastructure. Nous analysons un jeu entre deux ports, dont le premier a l'avantage de prendre sa décision avant son adversaire. Dans chaque port, il y a un cartel qui s'occupe de la distribution des biens produits par des établissements localisés entre les deux ports. Les cartels prennent comme donnée l'infrastructure construite par les gouvernements respectifs qui se font concurrence. On démontre que l'un des deux gouvernements a intérêt à utiliser la stratégie de préemption en investissant très généreusement en infrastructure.(This abstract was borrowed from another version of this item.)