A New Theory of the Shipping Firm in the Framework of Pure Competition
- 1 Department of Maritime Studies, Faculty of Maritime and Industrial Studies, University of Piraeus, Piraeus, Greece
- 2 Shipping, Transport and Logistics Department, Business College of Athens, Athens, Greece
Abstract
This paper came out from one of the great questions—systematically avoided by Maritime Economists: “Is shipping industry working in a perfect competition?” We concentrated on the dry and liquid cargoes. First, we wrote down the theoretical requirements for a Perfect competition and compared them with the actual ones. We distinguished the “free entry” as the most important condition, which however became harder as one LNG-newbuilding may cost $200 m and over. Next, we corrected the existing theory, which wanted to maximize the profits of any entire fleet, and we showed that a shipping company must aim at maximizing ship’s voyage profit . We mentioned cases where perfect competition was distorted. In addition, a detailed analysis of Demand for ship space and the Supply of it, attempted so that to reach the important interplay of demand and supply, which is the price of shipping services. Moreover, we rejected Marshall’s theoretical distinctions of the short- and long-periods for shipping companies, and established that shipping companies are always in the long-run , but simply are unable to build ships. This changes the entire philosophy of shipping company’s strategy.
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