nep-tur New Economics Papers
on Tourism Economics
Issue of 2006‒01‒29
one paper chosen by
Antonello Scorcu
Universita di Bologna

  1. A Model of Partial Regulation in the Maritime Ferry Industry By Angela S. Bergantino; Etienne Billette de Villemeur; Annalisa Vinella

  1. By: Angela S. Bergantino (University of Bari, Department of Economics, Via C. Rosalba, 53, 70124 Bari (Italy)); Etienne Billette de Villemeur (University of Toulouse, IDEI and GREMAQ, Manufacture des Tabacs, Aile Jean-Jacques Laffont); Annalisa Vinella (University of Toulouse, GREMAQ, Manufacture des Tabacs, Aile Jean-Jacques Laffont)
    Abstract: In this paper, we study how maritime ferry industries should be regulated. This is a fundamental issue in so far as maritime transport between islands and mainland is a service of general interest. We argue that the policy design crucially depends on the goals the collectivity pursues (pure e¢ ciency, fairness) as well as on the relevant industry structure (monopoly, oligopoly). We show that the regulator needs to prevent ine¢ cient crowding out, whenever room exists for access of new providers to former monopolies. By properly allocating tra¢ c across shippers, the regulated firm's budget constraint can then be relaxed. We subsequently shed light on the implications of adopting the territorial continuity principle to boost social fairness. We establish that the incumbent's public service obligations dump the entrant's incentives to provide connections in the low season; conversely, soft competition encourages the entrant to operate in the high season, when it pockets a net rent. As to customers, our model predicts that the islanders, whose consumption is partly subsidized by the non-residents, patronize the incumbent and that liberalization directly benefits the non-residents who switch to the entrant.
    Keywords: Maritime transport; Price and frequency; Partial regulation; Territorial
    JEL: L51 L92 R48

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