Container Liner Shipping Alliances, Excess Investment, and Antitrust Immunity

Introducing the unique characteristics of the international marine transport industry, this paper examines whether load capacity is excessive or insufficient in the presence of uncertainty on the future economic situation in terms of both welfare of one country and global welfare. We also consider the effect of alliances and the application of antitrust immunity on capacity building of shipping liners. We find that the transportation charge may be lower than the marginal operation cost and, accordingly, the profits of liners/firms may be negative in a recession. We also find that global alliances increase the supply of transportation services. Moreover, we demonstrate that the supply of transportation service and the investment for decreasing the marginal operating cost by each liner is insufficient in terms of global welfare when there are neither governmental supports nor global alliances. On the other hand, global alliances mitigate the degree of insufficiency of the supply and investment, and make the problem of excessiveness more serious.