National Ports & Waterways Institute, Louisiana State University, 2300 Clarendon Blvd., Suite 300, Arlington, VA 22201, USA

Abstract

Following privatisation, ports face an immediate need to set their prices. For this, they should assess their strategic environment, including: (a) the complex, network-like structure of their port system consisting of principal and intermediary parties; (b) the flow of services and related charges among the above-mentioned parties; (c) the differentiation and price discrimination in the market for port services; (d) the high concentration on both the demand and supply sides of this market; and (e) the mixture of competitive and cooperative behaviours among market agents. The methodology for price setting presented in this paper is based on a systematic assessment of the strategic environment. The methodology employs two novel diagnostic tools: a charge-flow diagram for analysing the allocation of port charges among principal and intermediate parties, and a game tree for analysing the port/competitors, action/reaction dynamics of the oligopolistic market. The methodology is discussed and illustrated using the case of the Port of Cartagena, Colombia.