A shipping conference is a monopolistic organization

What is a shipping conference?

A shipping conference, also known as a liner conference, is an association of several shipping companies that follow certain terms and then provide services. It is an arrangement between two or more than two shipping lines to provide regular service on certain trade routes at uniform freight rates and common business terms.

What is a non-conference shipping line?

Shipping lines that are not members of a conference for a particular route are known as outsiders, independent lines, or non-conference lines. Also called a steamship conference.

Why is there no competition in shipping line services?

So competition in line services is considerably limited due to high initial investment, limited number of competitors and conferences and agreements formed by them for regulating the rates, traffic, and other conditions. Competition has led to rate wars and collapse of shipping companies.

What is monopolistic competition?

What is Monopolistic Competition? Monopolistic competition is a type of market structure where many companies are present in an industry, and they produce similar but differentiated products. None of the companies enjoy a monopoly, and each company operates independently without regard to the actions of other companies.


What is the purpose of a shipping conference?

Shipping conferences refers to shipping companies that have formed an association to agree on and set freight rates and passenger fares over different shipping routes. There are different shipping conferences for different regions of the world.


What is a steamship line conference?

January 16, 2017. A group of vessel operators joined together for the purpose of establishing freight rates. A shipper may receive reduced rates if the shipper enters into contract to ship on vessels of conference members only.


What is conference system in liner shipping operations?

It is an arrangement between two or more than two shipping lines to provide regular service on certain trade routes at uniform freight rates and common business terms. Shipping lines that are not members of a conference for a particular route are known as outsiders, independent lines, or non-conference lines.


What is non-Conference shipping?

Non-Conference Line is a shipping line which operates on a route served by a liner conference but which is not a member of that conference.


What is the conference system?

Literally, the conference system is a complete set of audio equipment to assist the participants in a conference to communicate comfortably, so that everyone participating in the conference can “hear” and “speak” clearly.


How do shipping alliances work?

Members of an Alliance operate services jointly, on a fixed weekly schedule, usually covering all the bigger trade lanes. Members pool their resources and commit to a certain pre-decided number of vessels on each service, aggregating a pre-determined amount of capacity.


What are the characteristics of liner shipping?

Fixed Schedule goes with fixed route. A vessel expected to cover various ports will have to have a fixed time schedule to call at the respective port. No deviation from the route will be allowed because of non-availability of cargo at any one of the ports in the trade route fixed already.


What is a close liner conference?

This type of liner conference restricts membership in order to protect the members’ market share. It is the most common type of conference. This type of conference is frequently criticized because it is seen as being against free markets and “laissez faire”.


What is meant by contract of affreightment?

A contract of affreightment is a contract between a ship-owner and a charterer, in which the ship-owner agrees to carry goods for the charterer in the ship, or to give the charterer the use of the whole or part of the ship’s cargo-carrying space for the carriage of goods on a specified voyage or voyages or for a …


What is freight structure?

A freight rate (historically and in ship chartering simply freight) is a price at which a certain cargo is delivered from one point to another. The price depends on the form of the cargo, the mode of transport (truck, ship, train, aircraft), the weight of the cargo, and the distance to the delivery destination.


What are the four types of shipping conferences?

Most work on shipping conferences has involved four kinds of models: monopolistic cartels; contestable markets; destructive competitive; and empty cores.33 The argument that conferences are monopolistic cartels is at least as old as Alfred Marshall,34 who argued that conferences could act as monopolists because there were substantial scale economies in the industry that led to a small number of firms. Lenin and the Marxist historian J.A. Hobson described shipping conferences as vivid examples of the tendency toward the concentration of capital.35 The other explanations arose largely as responses to the cartel model. Destructive competition and its modern variant, the empty core, are alternative explanations of why conferences exist. Contestable markets have been used to criticise the proposition that conferences can usefully be described as monopolistic cartels. This matters for competition policy, because if conferences are not monopolising cartels, then competition policy need not address them.


What is liner shipping?

Liner shipping is the business of offering common carrier ocean shipping services in international trade. Since it became an important industry in the 1870s, it has been characterised by various agreements between firms. Historically, since the formation in 1875 of the Calcutta Conference, the conference system was the primary form of agreement in liner shipping. Variously called liner conferences, shipping conferences, and ocean shipping conferences, they are formal agreements between liner shipping lines on a route, always setting (possibly discriminatory) prices, and sometimes pooling profits or revenues, managing capacity, allocating routes, and offering loyalty discounts. Conferences agreements were quite successful and in many cases have lasted for years. In the last two decades, conferences have begun to be supplanted by alliances (particularly in the American and European trades, where legislative changes have been unfavourable to them), which are less complete (they do not, for example, set prices) but encompass more broadly defined trade routes.


What is international liner shipping?

International liner shipping has long been dominated by collusive agreements, originally conferences and more recently alliances. Conferences have been used since at least the 1870s, when the industry was being established. In recent years, these agreements have been supplemented and replaced by other kinds of agreements such as consortia and alliances. The focus of this chapter is on explaining the economic models of competition used to analyse cooperation in liner shipping for purposes of competition policy.


What is contestable market theory?

The theory of contestable markets focuses heavily on sunk costs. It draws on the insight that potential competitors are a constraint on pricing behaviour as much as actual competitors. Suppose in a market there are no sunk costs and incumbent firms do not respond to entry by lowering prices. Then entry is costless in the sense that all costs of entry can be recovered on exit. Entry is therefore riskless. Moreover, the entrant can make its entry decision without regard to strategic decisions by the incumbent.


What is a monopolistic market?

Understanding Monopolistic Markets. A monopolistic market is a market structure with the characteristics of a pure monopoly. A monopoly exists when one supplier provides a particular good or service to many consumers. In a monopolistic market, the monopoly, or the controlling company, has full control of the market, …


What is a monopoly?

The term “ monopoly ” originated in English law to describe a royal grant. Such a grant authorized one merchant or company to trade in a particular good while no other merchant or company could do so.


Why is a monopolistic market undesirable?

According to neoclassical analysis, a monopolistic market is undesirable because it restricts output, not because of monopolist benefits by raising prices. Restricted output equates to less production, which reduces total real social income.


What is the objection to monopolistic markets?

The typical political and cultural objection to monopolistic markets is that a monopoly, in the absence of other suppliers of the same product or service, could charge a premium to their customers. Consumers have no substitutes and are forced to pay the price for the goods dictated by the monopolist. In many respects, this is an objection against high prices, not necessarily monopolistic behavior.


How does a monopoly maximize its profit?

A monopoly is a profit maximizer because by changing the supply and price of the good or service it provides it can generate greater profits. By determining the point at which its marginal revenue equals its marginal cost, the monopoly can find the level of output that maximizes its profit. With generally only one seller controlling …


Why are monopolies at a disadvantage?

Potential entrants to the market are at a disadvantage because the monopoly has the first-mover advantage and can lower prices to undercut a potential newcomer and prevent them from gaining market share.


What is a monopoly in business?

Key Takeaways. A monopoly describes a market situation where one company owns all the market share and can control prices and output. A pure monopoly rarely occurs, but there are instances where companies own a large portion of the market share, and ant-trust laws apply.


What is monopolistic competition?

Monopolistic competition is a type of market structure where many companies are present in an industry, and they produce similar but differentiated products. None of the companies enjoy a monopoly, and each company operates independently without regard to the actions of other companies.


What happens to companies in monopolistic competition?

Companies in monopolistic competition will earn zero economic profit in the long run. At this stage, there is no incentive for new entrants in the industry.


How do companies compete in a monopolistic market?

Companies compete based on product quality, price, and how the product is marketed. Companies in a monopolistic competition make economic profits in the short run, but in the long run, they make zero economic profit. The latter is also a result of the freedom of entry and exit in the industry.


Why is freedom to exit due to continued economic losses important?

The freedom to exit due to continued economic losses lead s to an increase in prices and profits, which eliminates economic losses. In addition, companies in a monopolistic market structure are productively and allocatively inefficient as they operate with existing excess capacity.


How does monopolistic competitiveness affect unemployment?

Such costs can be utilized in production to reduce production costs and possibly lower product prices. Since companies do not operate at excess capacity, it leads to unemployment.


How does monopolistic competition affect the short run?

Companies in monopolistic competition determine their price and output decisions in the short run, just like companies in a monopoly. Companies in monopolistic competition can also incur economic losses in the short run, as illustrated below.


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