Determining optimal transit charges: The Kiel Canal in Germany

generate a balance sheet profit? In this paper, we focus solely on the canal’s revenue. Because the canal is a monopoly that allows, in principle, for perfect price discrimination, we contrast the current charging system with an optimal charging system based on the willingness-to-pay (WTP) approach. We devise a general approach to calculate optimal transit charges and apply it in a case study that includes four different ship types. We conclude that much higher revenues could be generated, on the order of between $5 and $45 million more per year and ship type if the transit charge were based not only on ship size but also on a ship’s departure and destination ports.