Changes in market structure and pricing of the international liner shipping industry

The market structure of the international liner shipping industry evolved from a collective monopoly (1875-1945) to an oligopoly (1945-1984), and is now moving towards a more competitive one (since 1984) due to changes in technical, economic and legislative conditions. This dissertation studies the causes of these changes and applies different economic models to analyzing firms' behavior in the three stages of the development of the industry.; In the collective monopoly stage, carriers organized freight conferences which fixed freight rates on each trade route and charged discriminatory prices among commodities. Conferences adopted an entry limit pricing strategy to block potential entrants. The strategy, in combination with a rebate system, was essentially successful. To suppress internal competition, conferences allocated product quotas among member carriers and took measures to prevent cheating. After the Second World War, shipping lines from the NICs (newly independent countries) and other developing countries entered the industry on a massive scale. A large number of these new carriers operated outside the conference system. The market changed to an oligopoly. In general, the independent operators and the conferences adopted a cooperative strategy, with the conferences acting as price leaders and the independents as followers. The discriminatory price system was preserved. A "repeated prisoners' dilemma" noncooperative game theory model was used to explain why collusion was sustained between the two sides in an oligopoly context. The containerization revolution and the enactment of the 1984 U.S. Shipping Act are having great impact on the structure of the industry. Currently, the industry is moving in a new direction. The "mainline" trade routes linking North America, Europe and the Far East are moving toward markets characterized by a certain degree of contestability. In the transition process, freight conferences that have existed in the industry for more than one century are predicted to fade. The pricing mechanism of the industry is under pressure to move away from a discriminatory system based on the content of the cargo being shipped and towards a uniform system based on mass and volume.; There are factors that favor and hinder the market moving in a more competitive direction. The dissertation urges maritime policy makers to take measures to facilitate the transition.