Tacit Collusion or Cost Efficiency: Evidence from the Container Liner Shipping Industry

Collaborative agreements in container shipping have a long history of granting antitrust immunity and have been suspected of fostering collusion among carriers. The conduct parameters considered in a conjectural variation model are estimated to examine the market power of carriers. This paper reveals that competition in the market approximately follows a Cournot game, and cost efficiency mainly determines market power. The largely increased market power during the COVID-19 pandemic can be attributed to the transitory supply shock. This study suggests that shipping collaborations do not facilitate carriers to collude, in turn justifying the granting of antitrust immunity to shipping alliances.