Strategic alliances in liner shipping. concentration and economies of scale

Abstract

The aim of this investigation is to examine the phenomena of strategic alliances among maritime carriers. During the last decade this process has accelerated, jointly with the introduction of megaships in the industry. This has caused the number of operators in the market to fall to only four big alliances controlling the 99% of the market share. The main argument provided by companies is that this process is done to gain economies of scale and operational synergies. In order to test this argument an average cost function that depends on the number of operators in the industry, thus if there are strategic agreements or not among carriers, has been estimated and it has been found to decrease when strategic alliances are established. This means a better situation in terms of efficiency due to the concentration of the sector but it does not mean lower prices or an increase in the general level of welfare. Testing this goes far from the scope of this research but it could be interesting to pursue the investigation in the future.