Abstract
The divergences between existing freight-rate structures and the marginal cost structure discussed in the previous chapter are bad. Even worse, we think is another source of inefficiency, namely: the price-rigging power itself of liner-shipping conferences easily causes both excess capacity and excessive service competition between conference members. It has puzzled many observers that in the thoroughly cartelized liner-shipping industry, supernormal profits are generally absent. Some commentators have suggested that liner-shipping companies do not want to maximize profits. A more plausible explanation, in our view, is that the potential monopoly profits are turned into costs — costs of inputs into the fight for the expected reward. Compare Posner (1975), who summarizes the general phenomenon thus: ‘Competition to obtain a monopoly results in the transformation of expected monopoly profits into social costs.’
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© 1987 J.O. Jansson and D. Shneerson
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Jansson, J.O., Shneerson, D. (1987). Potential cartel profits become social costs. In: Liner Shipping Economics. Springer, Dordrecht. https://doi.org/10.1007/978-94-009-3147-3_12
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DOI: https://doi.org/10.1007/978-94-009-3147-3_12
Publisher Name: Springer, Dordrecht
Print ISBN: 978-94-010-7914-3
Online ISBN: 978-94-009-3147-3
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