It Pays to Be Big: Price Discrimination in Maritime Shipping

CAEPR WORKING PAPER SERIES 2020-002

51 Pages Posted: 3 Mar 2020 Last revised: 22 Nov 2021

See all articles by Adina Ardelean

Adina Ardelean

Santa Clara University

Volodymyr Lugovskyy

Indiana University Bloomington - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: January 29, 2020

Abstract

We explore theoretically and empirically the within-route price discrimination in liner shipping and condition it on the market density. Using transaction-level data from over 200 Chilean import port-to-port routes, we confirm our theoretical predictions and demonstrate their robustness and economic significance. Quantitatively, importers in the 10th percentile pay 23% higher freight rates than importers in the 90th percentile, but only on routes with more than three carriers. Our results indicate that reducing market power distortion in the upstream sector (transportation) may amplify the informational friction distortion and price discrimination in the downstream sectors (importing industries).

Keywords: Freight Rates, Firm Size Advantage, Maritime Shipping

Suggested Citation

Ardelean, Adina and Lugovskyy, Volodymyr, It Pays to Be Big: Price Discrimination in Maritime Shipping (January 29, 2020). CAEPR WORKING PAPER SERIES 2020-002, Available at SSRN: https://ssrn.com/abstract=3529520 or http://dx.doi.org/10.2139/ssrn.3529520

Adina Ardelean (Contact Author)

Santa Clara University ( email )

500 El Camino Real
Santa Clara, CA 95053
United States

Volodymyr Lugovskyy

Indiana University Bloomington - Department of Economics ( email )

Wylie Hall
Bloomington, IN 47405-6620
United States

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