Costs, Benefits and Pricing of Dedicated Container Terminals

This paper analyses some of the implications of the emergence of dedicated container terminals (DCT) in the past 10 years. It presents a general overview of DCTs and stresses, through the use of a generalised port cost function, that one of the main factors that could explain this development is the increasing gap between the objectives of ports and those of shipping lines. The main implications of a DCT, from a port viewpoint, are analysed next through the employment of a simple queuing model. It is shown that under certain assumptions, a carrier with exclusive access to facilities and the port providing them could both benefit through such a strategy. At the same time, the model underlines that eventual losses would be born mainly by those carriers who, as a result, can now use only a restricted number of servers (berths). The paper shows that such losses could be even higher in the presence of direct (club effect) or indirect (hardware/software paradigm) externalities and that the choice of DCT is similar to the access pricing of a bottleneck in a network industry. Finally, the paper develops a hypothetical pricing rule (Efficient Component Pricing Rule) that could be used to internalise such external effects.