71st International Atlantic Economic Conference

March 16 - 19, 2011 | Athens, Greece

The Economics of Concentration in Shipping: Consequences in the VLCC Tanker Sector

Saturday, 19 March 2011: 09:00
Andreas Merikas, PhD , Finance, The American College in Greece-Deree, Agia Paraskevi, Greece
Andreas Merikas, PhD , Finance, The American College in Greece-Deree, Agia Paraskevi, Greece
Dionysios Polemis, PhD , Shipping Studies, University of Piraeus, Piraeis, Greece
Anna Triantafyllou, PhD , Economics, The American College in Greece-Deree, Agia Paraskevi, Greece
This paper focuses on the question whether there is a concentrated market structure in the tanker shipping industry. The assumption generally accepted by scholars and practitioners alike is that the tanker industry operates within a perfectly competitive environment. The purpose of this study is twofold: first to measure the degree of concentration in the industry using literature defined concentration ratios and second to examine the effect, if any, on the formation of freight rates in the industry during the period under examination 1993(1)-2009(12). Our empirical results reveal a significant increase in market concentration in the VLCC sector post 1993. Moreover, we substantiate a positive relationship between freight rates and market concentration over the period examined. Thus, expectations regarding the future course of concentration are critical for forecasting the direction of freight rates.