Eugenides Group, Greece. E-mail: gdikos@alum.mit.edu

Abstract

Since the pioneering work of Zannetos in maritime economics, it has been well understood that prices of new vessels are non-stabilising. In the earlier literature, most of this behaviour has been attributed to market imperfections and externalities. In this paper, we test empirically the stabilising role of the prices of new vessels through the application of advanced econometric tests. Finally, we challenge the assertion that the sub-optimal behaviour of new building prices is due to market anomalies, such as subsidies, and propose a perfectly competitive paradigm that can successfully accommodate the observed patterns of new building price behaviour.