TITLE:
A New Theory of the Shipping Firm in the Framework of Pure Competition
AUTHORS:
Alexandros M. Goulielmos
KEYWORDS:
The Pre-Conditions of Perfect Competition, A New Theory of the Shipping Firm, The Demand and the Supply of Ship Space, The Price of Shipping Services, The Short- and Long-Run in Shipping Industry
JOURNAL NAME:
Modern Economy,
Vol.13 No.8,
August
23,
2022
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.