A Discrete-Time Stochastic Partial Equilibrium Model of the Spot Freight Market

This article gives a history of efforts to model spot freight rates in bulk shipping and presents an approach that addresses some shortcomings in previous modeling. This freight market equilibrium model is intended to be able to replicate the empirically observable stochastic nature of both spot freight rates and aggregate scrapping/contracting activity. The approach first models time-varying shape of the supply curve and also specifies and estimates new probabilistic functions for aggregate demolition and contracting dynamics. This approach also applies the Method of Simulated Moments to estimate demand elasticity of freight rates when the fleet is fully employed. Finally, the model is developed in discrete time. The article suggests that stochastic equilibrium models will be of great potential use. Conclusions are presented, including the finding that the simple perfect competition model is not the appropriate pricing model.

  • Availability:
  • Authors:
    • Adland, Roar
    • Strandenes, Siri P
  • Publication Date: 2007-5

Language

  • English

Media Info

Subject/Index Terms

Filing Info

  • Accession Number: 01054527
  • Record Type: Publication
  • Source Agency: UC Berkeley Transportation Library
  • Files: BTRIS, TRIS
  • Created Date: Jul 13 2007 3:05PM