Abstract
PUBLIC PORTS GENERALLY SET RATES ON A BASIS WHICH FAILS TO COVER FULL COSTS. SUBSIDIES ARE COMMON, ESPECIALLY IN THE FORM OF CAPITAL GRANTS OR PUBLIC BOND ISSUES. ALTHOUGH MANY US PUBLIC PORTS HAVE FORMED REGIONAL CARTELS, PRICING OFTEN APPEARS TO BE BELOW LONG-RUN MARGINAL COST. THIS PRACTICE OF SUBOPTIMAL PORT PRICING MAY BE REINFORCED BY THE PRICING BEHAVIOUR OF SOME OCEAN CARRIERS. BECAUSE MOST OF THE BENEFITS OF PUBLIC PORTS ARE PRIVATE BENEFITS TO SHIPPERS AND CONSUMERS, IT WOULD APPEAR TO BE SOCIALLY DESIRABLE FOR PORT PRICES TO BE INCREASED TO THE COMPENSATORY LEVEL AND SUBSIDIES GRADUALLY ELIMINATED.(Author/publisher).