Ocean Carriers’ Collusion Under Antitrust Immunity: Evidence of Asymmetric Pass-Through

Ocean Carriers’ Collusion Under Antitrust Immunity: Evidence of Asymmetric Pass-Through As fuel costs are the largest component of the shipping industry’s operating costs, this study examines whether ocean carriers pass fuel cost increases through to freight rates more quickly than they pass through fuel cost decreases. The focal price collusion theory suggests that such asymmetric pass-through could be a result of collusive behavior because collusion is easier to sustain when costs are falling than when costs are rising. Using a lag-adjustment model as the econometric framework, findings from this study show strong evidence for asymmetric adjustments of the US inbound freight rates in response to fuel cost changes. Such asymmetry persisted after the passage of the Ocean Shipping Reform Act of 1998. Moreover, the findings do not support the consumer search theory as an alternative explanation for the freight rate asymmetry. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Ocean Carriers’ Collusion Under Antitrust Immunity: Evidence of Asymmetric Pass-Through

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Springer US
Copyright © 2014 by Springer Science+Business Media New York
Economics / Management Science; Industrial Organization; Microeconomics
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