An Economic Theory of the Port

This chapter presents an economic theory of the port that considers both the demand for and cost incurred for the two-cargo (bulk and container) throughput of the port. Port-generalized prices include port charges and time prices incurred by ocean carriers', inland carriers' and shippers' ships, vehicles and cargoes, respectively. The theoretical port time, resource and cost functions may be used in empirical port studies to investigate determinants of and their effects on the times in port of ships, vehicles and cargoes; port resource utilization; and port costs. The means by which a port can differentiate its service (or operating options) include ship and vehicle loading/unloading service rates, channel and berth accessibility and reliability, entrance and departure gate reliability, and damage and property losses to ships, vehicles and cargoes in port. Alternatively, these operating options may be used as performance indicators to evaluate the performance of a port with respect to a port's economic objective such as maximizing throughput subject to a minimum profit constraint.