AN EXPLORATORY INVESTIGATION INTO PORT PRICING AND EXPANSION POLICIES THROUGH DYNAMIC PROGRAMMING

The basic economic principles which should go to support rational port pricing and expansion policies are applied to a simple port model. Optimum prices and expansion schemes consistent with three quite different objective functions are obtained, viz monopoly profit maximization, maximization of world real income (Pareto-optimality), and maximization of regional real income. For the last objective function, only a general method of solution is advanced. Dynamic programming techniques are employed in seeking out the best possible policy consistent with the objective function which the port chooses to follow from any year on. Simulation of some other policies involving arbitrary price setting and expansion criteria are studied for the purpose of comparison. The case where price is made equal to the total cost divided by the total throughput is also investigated. The net change in world real income in terms of short-run consumers' and producers' surplus and the long-run expansion cost of the port resulting from following each policy is compared with the results obtained in the eocnomically efficient policy consistent with the world real income maximization objective function.

  • Corporate Authors:

    Massachusetts Institute of Technology

    Department of Ocean Engineering, 77 Massachusetts Avenue
    Cambridge, MA  USA  02139
  • Authors:
    • Tan, L H
  • Publication Date: 1972-12

Subject/Index Terms

Filing Info

  • Accession Number: 00048352
  • Record Type: Publication
  • Source Agency: Massachusetts Institute of Technology
  • Report/Paper Numbers: MS Thesis
  • Files: TRIS
  • Created Date: Nov 14 1974 12:00AM